FWIW, IIonline upgrades CMGI to buy - after having it as a sell.
excepted blurbs from IIOnline's web site
(which is at iionline.com
)
----------------------
We're Upgrading
CMGI to Buy;
Buy (8/4)
CMG Information
Services (NASDAQ:
CMGI) shares rose 4%, to
$66.63, following the
announcement of the sale of PlanetAll, one of CMGI's
holdings. CMGI traded as high as $68.00 in today's trading on
a day when the broader market got crushed.
CMGI's CMG@Venture II subsidiary sold its 25% stake in
PlanetAll to Amazon.com (NASDAQ: AMZN). PlanetAll
is a provider of contact management services, such as an
address directory and a reminder service on the Web.
CMG@Venture II will receive 225,000 shares of
Amazon.com restricted shares ("restricted" means that
CMGI will be able to start selling these shares in the
beginning of November). Based on Amazon.com's current
share price of $110, the deal represents a 400% return on
CMG@Ventures II's total $5 million investment in
PlanetAll.
This announcement follows the sale of CMGI's 34%
investment interest in Reel.com, a Web-based video store, to
Hollywood Entertainment (NASDAQ: HLYW). Following
the transaction, CMGI will own 5 million shares of
Hollywood Entertainment at an average price of $13.75 per
share, or a $69 million total position. CMGI's original
investment in Reel.com was only $6.9 million, which means
that the company realized a 900% return on the investment
<<<<<<<<< STUFF DELETED >>>>>>>>>>
Successful Strategy
These transactions reveal how CMGI's stock has been driven
to current valuation levels. CMGI invests in leading Internet
players and is able to realize incredible returns on its
investments through spinoffs and stock swaps. CMGI's biggest
winner to date is the 8,900% return on its original investment
in Lycos (NASDAQ: LCOS).
Assuming that CMGI can earn 30 times on its private
investments, the potential value of its holdings, excluding
taxes and the value of Lycos, GeoCities, Engage/Accipiter,
Reel.com, SalesLink, and PlanetAll, is $690 million. Add the
value of the companies that have been excluded plus CMGI's
cash balance of $49 million, and CMGI's total valuation is
about $1.6 billion, or $70 per share. Note, that our model
values GeoCities at its expected IPO price of only $13.
Considering the success of some recent IPOs, such as that of
Broadcast.com, however, there is substantial upside to this
price.
The new valuation of CMGI does not mean that our old
model was incorrect. The old model valued CMGI's holdings
as private companies. However, with the latest
announcements, CMGI has earned a track record of
unloading its private holdings at substantial premiums. This
ability warrants a substantial upward adjustment in price of
CMGI.
Upgrading CMGI to Buy
We upgrade our recommendation of CMGI to Buy, from Sell,
based on its ability to establish terrific returns on investment
on its venture capital investments.
Analyst: Alex Yakirevich
Updated 8/4/98 with CMGI at $66.63.
Recommended 11/18/97 at $10.88 |
