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Technology Stocks : IFLY - travel sales on the web pure play

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To: ilh1 who wrote (3422)	1/3/1999 12:49:00 AM
From: M.R. Davis	Read Replies (2) of 4761

I just posted this on Yahoo and wanted to share it here: +++++++++++++++++++++++++++++ Let's be realistic about IFLY - please! When I see posts saying IFLY could be earning 50 cents a quarter because of IRIS, spanish website and more marketing - that gets me worried that we are losing site of reality. IFLY has a major strength that is also it's major weakness. Agents. IFLY picks up double the commission or more of other Internet travel agencies because the IRIS sytem forces you to get the price from a travel agent via a chat session. At the same time IFLY has to have a travel agent available to you. How is IFLY doing to expand it's operation? By getting more agents. But that is also IFLY's major cost - agent fees. Therefore expansion has be monitored closely so that costs do not overun revenues - this is the key to IFLYs profitability. PVTL can just put up 5 more servers but IFLY has to hire, train, install desks and equipment for another 100 travel agents. Can an agent handle more than one customer at once? I've been engaging with this question for several months and asking the management team this question every time I call - answers are somewhat cagey. I believe they don't know yet. They indicated that a good agent might handle two customers at once. But it was obvious to me that they haven't really had the chance to discover this yet. I believe an agent could handle two customers at once - in about half the time it takes for a normal telephone transaction. That would give a 4 x efficiency. However whether all agents can do this and to what extent agents will be kept that busy - I'm not sure. I guess the continued telephone operations and IRIS could raise the current 5 cents a quarter to 10 cents easily. Giving us 40 cents eps. At a PE of 35 the stock would be valued at $14. At a PE that takes into account future expansion and the development of business on the Internet - say a PE of 60 then we have a $24 stock. Internet valuations make no sense so we can't use them to value the company. How fast can they expand? Well we have no precise figures on the number of agents right now. Somewhere between 200-300 - Jerry Sendrow was very careful not to answer that question when I put it to him! If they add 15 agents a week then they could be upto a 1000 by the end of the year. That could give us a figure closer to 50 cents a quarter eps - as override commissions and economies of scale would be increasing the profit margin. Currently I wouldn't buy the stock above $24-$28 - above that I think it's overvalued. However you have to watch closely to see how quickly they are adding agents and if they are containing costs. It could be substantially higher than this too. JMHO V

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