Scroll down to SNMM...presently at 1.37/1.40...nice company:
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INTERNET STOCK NEWS™
internetstocknews.com
The Premiere Internet Industry Communication Vehicle
December 31, 1998
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Hello analysts, brokers, institutional and individual Internet stock
investors!
Welcome to Internet Stock News, the FREE weekly newsletter that highlights
internet stocks and industry news. We feel that the internet is a
revolutionary medium of communication that will be unparalleled for years to
come and therefore we only follow the growth of companies that derive the
majority of their revenues from the internet. We hope that you will enjoy
Internet Stock News and use it to gain an active edge and large profit
margin in today's Internet business and investment opportunities. Visit our
web site to read the latest Internet stock news just like the CEOs do and to
find out about today's Internet business and investment opportunities.
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Table of Contents
1. Internet Stock Outlook: The Ones to watch in 1999! By Chris Agarwal
2. A Safer Way to Ride the E-commerce Wave: Web Builder Stocks by Michael
Ogburn
3. Trading Internet Stocks Using Options: Basic Principles by Chirag Amin,
M.D.
4. Featured Company Updates
5. Weekly Announcements & ISN Events
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1. INTERNET STOCK OUTLOOK
by Chris Agarwal
As we say goodbye to what may go down as the most notable year this decade
we can't help but shed a tear. We have long believed that the Internet
would some day be realized by the masses as an amazing opportunity for
growth. In 1998 investors finally started to open their eyes to this fact.
When I started frequenting the Internet years ago there was no such thing as
secure e-commerce, there were no Snap.com ads on television, and I had never
heard of Team Lycos basketball. I'm sure we all remember the days of the
BBS in the early 90's, connecting to America Online with a 14.4 modem (Oh
how slow it was!), using Fetch, Archie, Gopher, Mosaic, and Telnet.
Remember the days when one's destinations for web search were usually Yahoo!
or Alta Vista? It seems like only yesterday, doesn't it?
Times have definitely changed. Just last week I watched the Insight.com
bowl and checked the highlights at CBS Sportsline, I watched the impeachment
hearing highlights using my Real Player, and I purchased all my Christmas
presents from Amazon.com, Onsale, and eToys using my Yahoo! Visa credit
card. It's sad to see greed and bureaucracy enter the world we once new as
the World Wide Wait and to some extent I actually miss the Internet being so
useless and slow. I think Kurt Cobain, the former vocalist for rock band
Nirvana, stated it best when he said “I miss the comfort in being sad.” The
Internet and specifically, World Wide Web, used to be a novelty that was
enjoyable to use from time to time to find information that I could find
nowhere else. Now it is a medium of mass communication far more efficient
than television, radio, or print media and companies such as America Online
and Yahoo! are considered some of the largest media companies in the world.
I can cry and moan all day, but it's not going to help. Tomorrow starts the
year 1999. Everyone now knows about the Internet and is ready to bid up
Internet stocks to ridiculous levels. For those of you who have been
following us since 1997 when we had the infamous name which we won't dare
disclose in fear of humiliation, it is now time to pay attention. The
stakes have been increased 100-fold. No longer are Internet stocks easy
buys and holds. They are all over television and almost any company even
remotely related to the Internet is immediately bid up to a multi-million
dollar valuation. Remember when we were talking about CMGI at $30 a share?
24/7 Media at $6 a share? Peapod at $3.50 a share? Infoseek at $23? Excite
at $25? Real Networks at $18? Do you remember when Onsale was priced at
$12 and when CDNow at $8 looked overvalued? Those were the days, my
friends. Those were the days when Internet Stock News was just a hobby,
when I could look forward to spending my weekends on San Diego beaches and
not answering phone calls from the media. Those were the days when we had
just over 100 subscribers, all of which I knew by a names not including an
“@” symbol.
1 ½ years, 55 IPOs, $23 billion in market capitalizations, 30,000
subscribers, 10 employees and a few interviews later, here we stand. We are
now considering opening up a corporate office in sunny Carlsbad, California
and doing our own public offering to fund our new Internet-ventures such as
free real time quotes on our upcoming web site.
This week, all of our editors came together and picked a group of companies
that we thought would fare best in 1999. What we were looking for was
mainly evidence to show that these companies would benefit by the further
acceptance of the Internet by the general population because of their
positions as leaders in their Internet sectors. These are only publicly
traded companies and if we had to throw private companies into the mix,
there would be no doubt that the story would be quite different. However,
investors have to spend their money on something and after four straight
years of bull markets, they have a lot of money. Just as a quick note, the
editors and holding company of this newsletter do hold positions in some of
these stocks listed here. However, whether we held positions in these or
not, we would believe the same. After all, it is our job to analyze the
Internet sector on a daily basis so you can bet that we put our money where
our mouth is. Here we go!
(In no particular order)
At Home (NASDAQ: ATHM): home.net, At Home is the leading high
speed Internet access company. Using cable modems to provide access, the
company can leverage users into dollars using a content network revenue
model similar to what media giants such as Time Warner and Viacom make
billions from. At Home provides Internet access at over 100x what your
average ISP can provide and the stock is up over 325% this year. Remember
that almost every single year since inception, AOL has increased in price
upwards of several hundred percent. Looks to us like At Home is just
getting started.
CMGI (NASDAQ: CMGI): cmgi.com, CMGI is a publicly traded Internet
venture capital company. If you don't hear about this one in one year's
time, we deserve to be shot. This company owns large positions up to 100%
complete ownership in over 20 leading Internet companies involved in
content, e-commerce, advertising, marketing, software, you name it! They
are extremely profitable with over $1 per share in the past two quarters and
trade at a P/E ratio of around 50. The company has had the insight to
invest in AOL, Lycos, GeoCities, and many others and has received an almost
5000% return on equity. This is an Internet giant that very few know about.
Etrade (NASDAQ: EGRP): etrade.com, You are probably all familiar
with this company. Etrade is the leading online broker. There are very few
industries that can reap large amounts of scalability from the Internet and
online trading is, in our view, currently #1. Simply connecting the trading
system with a web interface and supporting it with staff and marketing has
allowed this company to become extremely profitable. As other leaders in
their categories such as Ebay, Yahoo!, and Amazon.com soar, what happened to
Etrade? We think that after a few run-ups and corrections the leaders will
be given higher valuations than usual essentially making them “Blue Chip”
Internet stocks. Etrade is the leader in its category and can easily use
its clout to leverage revenues out of many other finance-related practices.
Starnet Communications (OTC BB: SNMM): starnet.ca , All of you
are looking for cheap Internet stocks. Well, you're not going to find them!
Good things aren't cheap and cheap things aren't good! That is, unless you
have several angry founders who created a company to capitalize on the
Internet porn industry and then left, selling their shares to the open
market causing a whopping 50% of the shares outstanding or 11 million shares
to be present in the float. Internet gaming, banned from the United States,
is huge in other countries. There are over 10 publicly traded Internet
gaming companies that no one knows about. Whether it be craps, roulette,
slots, horseracing, sports wagering, etc., this is an industry that is
ridiculously scalable and Starnet is the leader out of the publicly traded
companies on the U.S. exchanges. With over $10 million in projected
revenues for 1999 and profitability in its last two quarters, this company
has been called the “Microsoft” of Internet gaming. Trading at around $1,
we can't help but see plenty of upside potential.
Excite (NASDAQ: XCIT): excite.com , Everyone knows what Excite
is. The question is why hasn't Excite joined the ranks of the high-flying
Internet stocks? Share dilution and speculation is the answer. Ebay has
some 3 million shares trading and Ubid has less than 2 million. When
millions of unsavvy investors place market orders for these stocks they are
bound to fly sky high. Market capitalizations are based on shares
outstanding but created from the demand applied to the float. Therefore,
you get some silly valuations. Any long term investor knows that Excite is
considered to be #2 in the Internet portal race and that, if any company
deserves the some $15 billion valuation given to Ebay, it is this one. When
the shake out comes around and we know it will, the high-flying low-float
stocks will tumble downwards and the institutions will look for the leaders
in their category who have a history of knowing how to leverage users into
dollars. We think that they need not look further than Excite.
SportsLine USA (NASDAQ: SPLN): sportsline.com , This company is
working on #2 or 3 in the online Sports content sector and competes with
ESPN.com and CNNSI.com for online sports network. As the major players have
clout, CBS has branded this company and recently increased its ownership to
over 10% with more warrants purchasable at up to $30 per share. Sports is a
huge industry. It will take years for real sports fans to flock online but
those years will come quickly. This company is the first pure-play Internet
sports brand similar to the pure-plays of Yahoo!, Ebay, or Amazon.com that
have been given high valuations. They suffered some because of the cold
Football season and non-existent basketball season but we think they are
still a strong contender. When sports get hot again, expect to see CBS
SportsLine ads almost everywhere and expect the fools who watch them,
whether it be individual investors or fund managers to go running to their
trading stations.
Ticketmaster/CitysearchOnline (NASDAQ: TMCS): citysearch.com , If
there was ever a company whose growth prospects were ignored by the media,
this is it. While everyone says that the portal industry is changing and
that the local portal business will be huge, have they forgotten who is the
leader in that industry? CitySearch provides a brand name and backing by
Barry Diller of USA Networks that we wouldn't be surprised to see plastered
over every wall next year. They are in New York, Toronto, Nashville,
Portland, LA and they are coming to a town near you! What better way to
start using the Internet is there than to visualize its interface as a
friendly portal to your neighborhood stores, activities, and surroundings?
Clearly the leader in its category, based on its market cap. , they have
already experienced a behind-the-scenes run-up twice that of Ubid or half
that of Ebay's. Who knew?
Peapod (NASDAQ:PPOD): peapod.com , Once again, if you are
looking for a company that is the leader in its sector and that no one has
heard of, here it is. While most of us continue to shop for groceries by
visiting the store braving crowded parking lots and long lines, there is
another type of shopping going on elsewhere in which the store is brought to
you for less! This is Peapod, the leading national online grocery store.
While there is less scalability in this industry then in others, there is
little overhead because there is no physical store needed and less marketing
needed because much can be done online. They have the brand name, the
following, and the experience. If anyone can implement the idea on a
national basis, Peapod can.
Real Networks (NASDAQ: RNWK): real.com , Real is the leader in
Internet broadcast media and Internet investors are shallow to say the
least. Fickle day traders and Internet newbies have spent far more on a web
site called Broadcast.com than they have on the content and technology that
would even enable that web site to exist. Real Networks provides broadcast
content using the Real Player software downloaded to over 70 million PC's
and specific channels such as Bloomberg and ABC News. Once broadband access
becomes popular, watch out. A partnership with someone like At Home could
be even more scary. We are talking about the media networks of the future.
A buyout may be a strong possibility also. A company like Time Warner could
get their paws on 70 million PC's for chump change if they wanted to. Will
Rob Glaser stubbornly hold out is the question we ask.
FreeRealTime.com (OTC BB: FRTI): freerealtime.com , This small
California and Canadian-based company has one of the most viewed financial
sites in the industry and is stated to have more page views than CBS
MarketWatch, Dow Jones, Hoover's, CNBC Online, Schwab Online, Wells Fargo
and Bank of America banks, as well as Zacks Investment Research and
Waterhouse Securities. In less than one year, how did they do it? Simple.
By giving away free real-time quotes. They provide free real time quotes
for users on our site and they generate revenues through online advertising
and commerce. With hundreds of thousands of users and over 50 million page
views per month, we would view the company as positioned perfectly to take
advantage of the integration with a larger online trading or other financial
player.
DoubleClick (NASDAQ: DCLK): doubleclick.com, This should be a
no-brainer. Internet advertising is supposed to reach billions of dollars
by the year 2000. Who is the leading Internet advertising agency? You
guessed it. What type of valuations do leaders get? Yahoo!'s got $24
billion, Ebay has $10 billion, and Amazon.com has $17 billion. DoubleClick
hasn't even a billion. Go figure.
Onsale (NASDAQ: ONSL): onsale.com , While greedy and
unsophisticated investors place their bets on Ubid, Ebay, Cyberian Outpost,
Amazon.com and other e-tailers, they have almost forgotten about the founder
of large scale e-commerce. While AOL has spent years achieving 15 million
subscribers did someone forget that Onsale has spent far less logging 9
million bids? With a major alliance with Yahoo! to provide online exchange
similar to Ebay as well as small business auctions and everything from $99
Nintendo 64's to $12,000 Xerox copiers being sold on their branded site, we
think Onsale deserves some more recognition in 1999.
Others worth considering:
Barnesandnoble.com: barnesandnoble.com , This company postponed
their IPO just recently but then their parent company announced plans to
purchase Ingram Book, one of the largest distributors in the world. After
selling half its online business to German media giant Bertelsmann AG,
Barnes & Noble will easily have the financial backing and reach to win the
race against Amazon.com and others. Whereas Amazon.com has been given a $17
billion valuation, Barnes & Noble which would own half of its online IPO
spin-off has been given merely a $2.5 billion valuation. As we get closer
to a possible resumed IPO for the company, we may see the parent stock,
(NASDAQ: BKS), to appreciate quite a bit. After all, the large majority of
humans on this Earth and in this country still think Barnes & Noble when
they think of books and we doubt that will change any time soon.
CNET (NASDAQ: CNWK): cnet.com , CNET is one of the most
frequented online networks on the Internet. It is a true network model more
similar to television than are Yahoo! or Excite and some of that may come
from their television division. With backing from NBC and ownership of much
of Snap! we wouldn't be surprised, once again, for investors to fish up
shares as they see the Snap! ads rollout and revenues come in. At around
$50 a share, once again, there is a lot of speculation that could have
occurred here that hasn't as of yet. We still believe strongly that the
traditional media networks will enter the race with full force very soon and
that we have barely scratched the surface of this evolution. Next year will
be the year to get in or get lost in our opinion.
Lycos (NASDAQ: LCOS): lycos.com , Another no–brainer, Lycos is
one of the largest online portal networks in the world. It is rated #3
behind Excite and is still valued at far less than Ebay, Ubid, Amazon.com
and others. We don't think this will last very long. As the rumor of a CBS
buyout last summer, the company will no doubt be eyed by many media firms.
If consolidation hits, an Excite-Lycos partnership or the similar would also
be blockbuster although we doubt Excite's young and therefore somewhat
egotistic founders will let that happen. Nevertheless, once net stocks drop
like flies and the stages are set for another rally, the leaders in terms of
user base and brand name will remain, Yahoo!, Excite!, and Lycos!.
CDNow/Music Boulevard (NASDAQ: CDNW, NASDAQ: NTKI): cdnow.com ,
musicboulevard.com , One area that has been left unpublicized by
media is the Internet music industry. Music is huge. MTV continues to be
one of the most watched television stations in the world and American pop
music is much larger in other countries than it is in the U.S. Combine
CDNow's vast purchase networks created from their long-standing history on
the Internet along with Music Boulevard's comprehensive online content and
you get the leading online music company. With rumored buyouts from Time
Warner and Barnes & Noble, the pair trade at far less of a revenue multiple
than do other high-flying e-tailers. They won't last on their own and the
larger players can't reach their audience. We think a buyout may occur this
next year.
So there you have it, our favorite companies for growth in 1999. Leaders
get the highest valuations. Remember that while Excite and Lycos get decent
valuations, Yahoo! gets one that is almost 5 times the two combined.
Remember that we aren't telling you to buy any of these. In fact, we're not
saying that they will increase in stock price at all. We are simply saying
that, in our opinion, they are some of the leading publicly traded companies
in their sector.
We wish you the best in 1999 and hope that you are able to turn your
hard-earned salaries into fortunes by investments in Internet stocks. We
will try to help, but remember that Internet stocks are very risky and that
if you have little experience, you should probably consult a registered
adviser. |
