MALL---(valuations inside) Get on this sucker...
To: Brian H. (1132 )
From: Kenneth Yeh
Friday, Dec 4 1998 8:55PM ET
Reply # of 1136
I'm now EXTREMELY bullish on both MALL and UBID stock at its current prices.
Ok, let's take a realistic look at MALL and UBID and compare it with its competitors.
Online Retailers:
Market Capitalization:
Onsale (ONSL) ($36 7/16 close today) is worth $700 million
Cyberian Outpost (COOL) ($22 11/16 close today) is worth $503 million
Egghead (EGGS) ($17 13/16 close today) is worth $434 million
uBid Inc. (UBID) ($48 close today) is worth $427 million
Last Quarter's Revenues:
ONSL - $57.8 Million
COOL - $17.0 Million
EGGS - $35.0 Million
UBID - $15.3 Milllion
Last Quarter's Earnings:
ONSL - Loss of $3.29 Million
COOL - Loss of $5.97 Million
EGGS - Loss of $7.20 Million
UBID - Loss of $1.1 Million
Ok, now let's take a look at MALL versus its competitor (there are others of course,
but we'll focus on MWHS now):
Catalog/Mail Order Retailer:
Market Capitalization:
Micro Warehouse (MWHS) ($28 3/8 close today) is worth $991 million
Creative Computers (MALL) ($26 1/4 close today) is worth $268 million
Last Quarter's Revenues:
MWHS - $551.8 Million
MALL - $170.3 Milllion (without UBID)
Last Quarter's Earnings:
MWHS - Gain of $11.86 Million
MALL - Gain of $1.54 Million (without UBID)
Summary:
UBID vs its competitors:
So what can we make out of these numbers? Well, for one, I believe UBID's loss of
$1.1 million last quarter stands out the most out of all these numbers. On $15.3 million
in revenues, the loss was only $1.1 million which means the management at UBID inc. is
extremely good. They know how to keep the costs down and I think they're prime for
profitability within the next 6 months. Cyberian Outpost's loss of nearly $6 million last
quarter looks terrible. On top of that, they lost that much money on only $17 million in
sales. Furthermore, COOL has a huge market cap of $503 million which means either
COOL is extremely over-valued compared to UBID...or UBID ($427 million market
cap) is very undervalued compared to COOL. Looking at the other competitors of
UBID, we see a similar story. Each have more in revenue, market cap, but also much
more losses!! UBID is relatively new to the e-tailer community (started in the latter half
of 1997) and its revenue is bound to increase with time. More revenue does NOT mean
more profits. The big difference is the management at UBID. They can keep the costs
down which will in turn lead to profitability. At UBID's current price, I believe they're an
incredible BUY because they have demonstrated that they're closer than any other
e-tailer (ONSL, COOL, or EGGS) to riding the path to profitability.
Mall's Intrinsic Value:
People have totally disregarded MALL's intrinsic value. At $26 1/4 a share, they're
worth a measly $268 million in Market Cap. Compare that to Micro Warehouse's $991
million, MALL looks undervalued. However, I believe Micro Warehouse, with its
$11.86 million in profits last quarter, has shown its ability to make a good profit.
Earning-wise, MWHS is much superior to MALL, but we must also keep in mind that
MALL started its turn-around quarter last quarter. Both of these companies have
negative earnings (due to write-offs) during its last 12 months. However, people have
ignored MALL's core business. Some say MALL's only worth $10 by itself. I believe
that's ludicrious.
Let's take MALL's last quarter earnings for example. They earned $1.54 million last
quarter (without UBID). Let's multiply that by 4. We get a trailing-twelve-months
earning of $6.2 million. Divide the earnings by the market cap and we have a reasonable
P/E ratio of 43!
MALL's P/E = $268 / $6.2 = 43
For a company that recently announced its most aggressive marketing campaign in the
history of the company, a P/E of 43 is not unreasonable for a growth company like
MALL. I'm going to go out on a limb and say that I believe MALL IS FAIRLY
VALUED at $26 1/4 WITHOUT UBID.
JMO, Good luck all!
-Ken |
