WS, just for you from internetstocknews.com:
A SAFER WAY TO RIDE THE E-COMMERCE WAVE: WEB BUILDER STOCKS
By Michael Ogburn
So you missed Amazon (AMZN) when it was at 27 in January. Didn't catch eBay (EBAY) at 25 in October or Ubid (UBID) at 30 a month ago. And Onsale.com (ONSL), Cyberian Outpost (COOL), Digital River (DRIV) and a host of other e-tailers all slipped under your radar screen as their stock prices tripled or better during the past two months.
Do you feel like you got left at the station?
Well, you're not alone. Fortunately, an even bigger wave of e-tailing is on the way, as every company that sells anything scrambles to set up shop on the Internet. But just as you're ready to pull the trigger this time, you realize that the impending explosion of e-tailers may make picking winners even more difficult. In a year or so, the announcement that Joe's Widgets is going online will be greeted by “so what?' – not the 300% increase in trading volume and spike in stock price we see today.
So how do you invest safely in this cultural phenomenon called e-commerce?
For the conservative, I would suggest buying FedEx or any other publicly traded overnight delivery service. But for those looking to invest in the Internet, why not put your money behind the Web builders – the firms that are literally turning retailers into e-tailers?
Web development is currently a $4 billion industry that is expected to generate $15 billion by 2002. The pot at the end of that rainbow has systems integrators, design firms, management consultants like Arthur Andersen and big boys like IBM and EDS fighting to put every potential e-tailer online. And going online for an e-tailer no longer means just a nice home page - an e-commerce site requires systems integration, security, database-driven transactions, customer service and more.
Here's a closer look at some of the players, with a few hints as to why or why not they might be a good investment
(Note: this is an alphabetical listing, not a ranking).
-Cambridge Technology (CATP): Known for its proficiency in transaction processing, Cambridge is a fast-growing outfit that has been successful developing sites for transaction-heavy Wall Street firms. The company trades at 22 and has grown 50% in size each year since going public in 1993.
-Diamond Technology Partners (DTPI): This IT services firm is a relatively new entrant in the web development arena – but then again, who isn't? The Chicago-based firm is profitable and trades around 19 ½.
-K2 Design (KTWO): This small New York City player can't seem to get noticed despite high-profile clients such as Sony and America Online. Pluses: a new CEO and management team destined to land some major clients. Minuses: They just lost one of their major clients, Wavephore. K2 trades around 2 3/8.
-Sapient (SAPE): This successful systems integrator bought Studio Archetype to give it instant credibility (and ability) in the design function of web development. Its 50% stock rise two weeks ago would indicate that investors believe in the wisdom of this company. Sapient now trades near its 52-week high of 60.
-Think New Ideas (THNK): The good news: Think has done award-winning work for Fortune 500 clients, recently landed the high-profile Time Warner account, and was chosen by IBM as one of six agencies that will act as interactive partners. The bad news: insider selling, investor lawsuits and a dismal last quarter that surpassed even the worst-case numbers of the earnings warning. Think fell from the 30s in July to 3 in October, and now trades around 10.
-US Web (USWB): US Web's recent merger with the CKS Group should provide the creative advertising and media panache necessary to take this company to the next level. USWB has more than 30 Fortune 100 clients and spent much of the past year in acquisition-then-integration mode. A strong earnings report in January could send this stock soaring. Its stock price has climbed steadily since the October slide and now trades around 27.
-Xceed (XCED): This Madison Avenue (NYC) firm is a newcomer to web development and is also new to the Nasdaq. It features clients such as TheStreet.com as well as special software that tracks sales reps and more. Xceed is run by former Think CEO Scott Mednick and trades around 9.
That's just a partial listing of competitors, and it doesn't include the many private companies – such as Agency.com, iXL, Organic Online, Scient and others – that could make quite an impression as IPOs.
As with any stock, investors should look closely at the web developer's bottom line, especially its earnings and earnings projections. An absolute must is a visit to the company website, and we'd recommend taking the time to browse through some of the client websites as well.
Without a doubt, web developers stand to gain from the e-commerce revolution. Investors shouldn't expect eBay or Amazon-like returns, but some of these companies offer more profitability and less volatility. And in the long term, that makes some of them better bets than an e-tailer. |
