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NationsBanc Montgomery Sets 'Buy' Ratings On Nine Internet Stocks
Dow Jones Online News, Thursday, March 25, 1999 at 12:56
NEW YORK -(Dow Jones)- NationsBanc Montgomery Securities' Alan
Braverman on Thursday initiated coverage of nine Internet stocks with a
"buy" rating, but the Internet analyst cautioned that not all "buys"
mean the same thing.
Braverman, who recently left Deutsche Bank Securities to join
NationsBanc, set "buy" ratings on Amazon.com Inc. (AMZN), America Online
Inc. (AOL), At Home Corp. (ATHM), Excite Inc. (XCIT), Infoseek Corp.
(SEEK), Lycos Inc. (LCOS), Verio Inc. (VRIO), Xoom.com Inc. (XMCM) and
Yahoo! Inc. (YHOO).
"There are significantly different degrees of buys," Braverman told
CNBC Thursday. "Our top three picks, the blue chips, which have
consistently been AOL, Yahoo and Amazon, are meaningfully different than
some of our other buys, notably Verio and Infoseek, which for all intent
and purposes are tepid buys."
The analyst specifically said Amazon is "must-own." The company,
which began as an online bookseller, has moved into selling software,
music and videos. Some observers feel that Amazon, by adding even more
to its offerings, is poised to become a Wal-Mart of the Internet.
Braverman said America Online is another "must-own" blue-chip stock
of the Internet sector. He said the company is the industry's bellwether
and has created a "highly leveragable infrastructure that provides the
company with an opportunity to launch new businesses quickly and run
them at a very low cost."
Yahoo, another "must-own," has achieved two key success factors:
positive cash flow and earnings. Yahoo runs the most popular "portal"
Web site, or gateway to the Internet - though AOL and Microsoft Corp.'s
MSN Network still draw more traffic than any pure portal.
"Yahoo's management has created the leading pure-play Internet
franchise and has developed what we believe is a sustainable competitive
advantage based on our key factors: brand, distribution and content."
The analyst said At Home "is the clear leader in providing broadband
Internet access to consumers." The company has distribution agreements
with cable operators to use their cable lines for high-speed
transmissions of Internet data. The lines pass 50% of U.S. households.
At Home also recently agreed to buy Excite, a popular Web portal that
could help drive more customers to the cable-modem service.
Lycos, another big portal, "has achieved many of the key success
factors we look for in a company and has gained our respect by being
highly fiscally responsible," Braverman said. The analyst also endorsed
the company's controversial plan to merge with Barry Diller's USA
Networks Inc. (USAI). Lycos plans to merge with USA assets that include
the Home Shopping Network and Ticketmaster Online CitySearch Inc. (TMCS)
to create an online and television retail power. Lycos's largest
shareholder, CMGI Inc., has stated opposition to the deal in the wake of
a decline in Lycos's share price. But Braverman said the combination
with USA would create cross-marketing opportunities and operating
efficiencies for the "truly converged new media company."
Braverman pointed to Infoseek as a "portal in the midst of a
turnaround." He said the company has gotten a boost from an investment
from Disney Co. and the launch of the two companies' joint Go Network
portal. However, the analyst remains cautious in the near-term about
Infoseek's effort to reposition itself as a media company. He said he is
bullish on the longer-term prospects for the company, and recommended
that Infoseek focus on branding, content differentiation, expanding
distribution and revenue growth.
Investors would do well to be cautious about Verio, Braverman said,
noting that the company hasn't always executed its financial plans well
and that it has been spending more money and time than expected on
integration plans. Nonetheless, Braverman said the company has a
competitive advantage in providing Internet access to small- and
medium-sized businesses, warranting the "buy" rating.
Xoom.com is taking advantage of the Internet to provide a "better,
cheaper and faster" way of doing direct marketing, Braverman said. The
company provides users with free Web hosting and software tools, while
users give consent to receive e-mails from direct marketers and product
vendors.
Copyright (c) 1999 Dow Jones & Company, Inc.
All Rights Reserved.
Companies or Securities discussed in this article:
Symbol
Name
NASDAQ:AMZN
NYSE:AOL
America Online Inc
NASDAQ:ATHM
NASDAQ:LCOS
Lycos Inc
NASDAQ:SEEK
Infoseek Corporation
NASDAQ:VRIO
NASDAQ:XCIT
Excite Inc
NASDAQ:XMCM
Xoom.Com Inc
NASDAQ:YHOO
Yahoo! Inc
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