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Technology Stocks : ITURF Inc. ( NASDAQ:TURF ) -- Ignore unavailable to you. Want to Upgrade?

To: Oliver & Co who wrote (553)	10/4/1999 4:51:00 PM
From: Big Dog	Read Replies (1) \| Respond to of 614

Internet Etail Stock By Steve Harmon All year long the Internet etail stock group has been acting like Santa Claus at Club Med, slightly out of place lounging by the pool of Internet stock liquidity watching the splash and unable to swim. The important thing now that the holiday season begins to be thought about is that 35% to 50% of a retailer or etailer's revenue comes in the fourth quarter. Last November I wrote a seminal piece on etail and how the holiday season may affect the group, which sent the group soaring. This year I urge caution for the sector since not all etailers are created equal, gross and net margins matter more than ever. Increasingly the sector relies on scale to make up for net margins that are very thin or non-existent. Brands rule. Hurting most of the group has been huge marketing costs as they compete to build brand recognition. Increasingly I see that more well known brands in the highly-competitive space may start to consolidate products since adding another product is easy but building a brand in a sea of etail dot.coms popping up daily is difficult. That's why the more consumer-oriented firms like AOL, Amazon, eToys, Yahoo could emerge as holiday stars over time, despite the fact that AOL and Yahoo have no thought of themselves as etailers. But they do lease space to etailers and chalk up a win in that regard. Let's get a snapshot of some of the etailers out there-- The 1999 E-TAIL Holiday WatchList: Software Beyond.com (NASDAQ:BYND), Egghead (NASDAQ:EGGS), Digital River (NASDAQ:DRIV) Books Amazon.com (NASDAQ:AMZN), barnesandnoble.com (NASDAQ:BNBN),Borders (NYSE:BGP) PCs Dell (NASDAQ:DELL), ONSALE (NASDAQ:ONSL), Egghead (NASDAQ:EGGS), Gateway (NYSE:G) Music CDnow (NASDAQ:CDNW), Amazon (NASDAQ:AMZN) Gifts AOL (NYSE:AOL), Amazon, 1-800-Flowers (NASDAQ:FLWS) Travel Preview Travel (NASDAQ:PTVL), priceline.com (NASDAQ:PCLN) Clothing AOL, iTurf (NASDAQ:TURF) Electronics ONSALE, CNET (NASDAQ:CNET) Food AOL, Peapod (NASDAQ:PPOD), 1-800-Flowers Now this year the shoppingscape looks a little longer with more choices, some of which could enjoy a seasonal hop as gift buyers come to realize that the site they're buying from is also a public company. While last year's etail party was what I would call the "First Etail Christmas" this year the Internet and shopping have become almost something taken for granted. That benefits revenue results and I expect sales to be double what they were last year for the top sellers in major categories. Also, for 1999 the customer and trust levels have grown exponentially. e-harmon.com estimates that perhaps 25 million customers may buy a holiday gift via the Web this year (out of a global Internet user base of 150 million). In dollars we estimate $7 billion globally sold in fourth quarter. Specifically, consumers in the U.S. (with Web usage at 25% to 30% of households) no longer debate the security issues about using credit cards on to buy on the Internet. Convenience also is now taken for granted. Cheap delivery, fast, doorstep, no holiday crowds to compete with. Price points compete and beat the mall. Also, a key shift to more women (about 50%) and children (about 15%) of Internet users brings to play a more shopping-centric demand for 1999 since a majority of all retail buys from groceries to clothing are made by women, driven by guess? their kids who want, want, want. We use Amazon as the ultimate proxy for etail: key difference this year is Amazon's emergence as a broader etailer rather than just books. People may forget but just a couple years ago Amazon only had $15 million in annual sales. First six months of 1999 it posted $608 million, easily outpacing any other seller on the Web. In the above list we expect Amazon, eToys (the first newbie to the group for 1999 holiday), eBay, AOL, to lead the pack given their girth and branding. But on what we dub the "under-discovered" list we keep an eye on iTurf (NASDAQ:TURF) due to its Delia's Website that's a popular apparel buying spot for teenage girls. On a pure market cap to annualized revenue multiple we believe Onsale (NASDAQ:ONSL) looks somewhat attractive. ____________________________________________ e-harmon.com's Ho-Ho-Holiday Company Ticker Mkt cap Rev multiple eToys ETYS $ 7,568 237.2 eBay EBAY $ 17,878 96.8 Priceline PCLN $ 9,184 28.5 Amazon AMZN $ 27,229 22.4 iTurf TURF $ 190 16.9 CDNow CDNW $ 358 3.1 Onsale ONSL $ 277 0.9 all $ in millions, as of Sept 29 ____________________________________________ At under 1x revenue Onsale may have some room. On another level CDNow (NASDAQ:CDNW) has been largely ignored as Amazon has eaten into music sales on the Net. However, at 3x revenue and a pending merger with leading direct music seller via mail Columbia House CDNW may be back on the charts soon. eBay may emerge as more than a flea market. Increasingly it is becoming a etail platform as small businesses set up auctions on it, leveraging its 3 million regular users into a buying engine. eToys high multiple owes to its market-leading edge as the toy-tailer of record as its competition lags. At 237x though we caution investors to not get carried away on too much expectation. For indeed, the entire group had a huge run last year on seasonal good cheer. But from first quarter until now the etail sector, except Amazon anyway, has been in a post-holiday funk that only now it starts to break out from. For despite barely being into Fall I think the market's looking closer at etail since it hasn't been a 1999 party so far. Tis almost the season to be jolly but not folly. -------------------------------------------------------