SEEK shares are up 10% after Merrill Lynch analysts Jonathan Cohen upgraded the stock to a near term accumulate from neutral, citing a positive outlook for the company's new Go Network.
Merrill, which left its long term buy rating on Infoseek's stock unchanged, also initiated a 12-18 month price target of $55 on Infoseek's stock.
The GO network, a joint venture with Disney Co. (DIS), was launched in a beta or preview form this week. Infoseek and Disney plan to officially launch the network of web properties-which will compete with popular internet navigation sites like Yahoo! Inc. (YHOO), Excite Inc. (E|XCIT) and Lycos Inc. (LCOS) early next year. As part of the companies' alliance, Disney is purchasing roughly 43% stake in Infoseek.
In his research note, Cohen said he believes the mGO Network "with its unique content, user base and Disney promotional support, could represent a legitimate rival to larger search and navigational companies."
The analyst estimates the network reaches about 23 million users-"placing the GO Network behind Yahoo! and Lycos but ahead of Excite."
In his note, Cohen said he projects Infoseek will report a loss of 47 cents a share on $26.1 million in revenue for the 4th quarter. He added that he expects the GO Network to require significant promotional spending in the quarter, and that he expects SEEK to recognize about $97.4 million in one time write offs for in process research and development, goodwill, amortization and integration costs in the period.
Cohen projects SEEK will post a loss of $1.08 a share, excluding goodwill amortization, on the $165 million in revenue in 1999.
Infoseek posted a loss of 15 cents a share on $12.5 million in revenue in the 4th quarter of 1997, and a loss of 65 cents a share excluding restructuring charges on $34.6 in revenue for the full year.
Cohen said he expects Infoseek to break even in the 4th quarter of 2000 excluding goodwill amortization. Including that goodwill, the company won't start turning a profit, <9>until at least 2002, he believes.
SOURCE DOW JONES
With Merrill Lynch's analyst, Cohen's forecast of no profit until at least 2002, this stock should remain an excellent stock to buy on dips and to short on peaks.
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