I don't buy the "12 times 1999 earnings." Here is what the professionals at briefing.com had to say:
7TH LEVEL INC. (SEVL) 6 1/2 +4 11/16. At a time when anything remotely related to the Internet causes
the stock price to surge, this developer of character animation technologies which can be used to
quickly and easily create rich media content, announced today that it had entered into an agreement
with WaveTop, a unit WavePhore (WAVO 15 5/16 -1/16), to distribute its character animation technology
with WaveTop content to its users. As might have been expected, shares of of 7th Level are up more
than 230%, with almost 11 million shares trading hands, significantly above its daily average volume of
134,681. Of course, with the spike in price today, 7th Level has easily surpassed its previous 52 week
high of $4. While we're sure that this distribution arrangement is meant to enhance the prospects of both
companies and, in the process, increase shareholder value, we're sure that 7th Level did not expect such
a favorable reaction to its announcement. Or maybe it did. It is certainly not the first time that a company
has taken advantage of (frothy) market conditions to position its stock to ride a positive wave. Of course,
the agreement may turn out to be a hit for 7th Level, especially, since WaveTop's enabling software will
be part of the Microsoft Windows 98 operating system. However, 7th Level is a company that has not had
a positive quarter in the past four years and revenues fell close to 50% in 1997 from year-ago to $10.499
million. In fact, we could not find anyone that follows the stock and we were not able to get any
estimates for what the company expects to "earn" in future periods. But, given that this issue is currently
being urged on by momentum players, don't be surprised if in the next couple of weeks or so, this issue
comes back to earth. |
