Over the past couple of years, I have relied on www.briefing.com for their great analysis. I really owe a lot to this service...they've made me a great deal of money.
They have given me permission to post the following GNET Stock Brief that appeared on Briefing.com on Dec. 17th.
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Trader's Edge: Go2Net (GNET)
17-Dec-99 00:03 ET
[BRIEFING.COM - Patrick J. O'Hare] There is almost a sense of nirvana in the tech sector right now-- at least with respect to a select group of stocks that includes the industry bellwethers, the B2B and Linux-related issues, the wireless companies, and many of the Internet shares. Fortunately for its shareholders, Go2Net has not been left out in the cold by the investment community. In fact, it finds itself in a very cozy position, having risen 974% YTD on a split-adjusted basis. Heck, at its intra-day peak yesterday, GNET was up 54% this month alone.
Trading Points
The impressive move this month has been accompanied by strong volume and resulted in the stock breaking out to a new all-time high, eclipsing its April peak of 99 1/2.
While it is obvious the stock has been in favor this year, the fourth quarter push has been helped by supportive comments from Wall Street firms, the announcement of new strategic alliances with the likes of Net2Phone, Hasbro, and Allegiance Telecom, and of course, some good old momentum.
Given the scope of recent gains, one can't begrudge investors for wanting to take some money off the table; and they did just that yesterday in the final hour... Strikingly, volume was 2.165 mln shares-- more than 2x its 3-month daily average-- yet block trades accounted for only 108.5K shares of that total, suggesting that it was the retail investor stuffing his or her stocking.
As for Wall Street, the backing of GNET has been pretty steady as the company has given analysts reason to be bullish (as far as the internet stocks go)... Currently, analyst recommendations include 3 Strong Buys and 3 Moderate Buys.
In its latest earnings report (fiscal Q4), GNET, before charges, posted a profit of $0.12 per share, 6 cents ahead of estimates, and versus a yr-ago net of $0.00; revenues rose 293% to $9.784 mln and were up 71% on a sequential basis... Gross profit as a percentage of net sales increased to 81.9% from 72.0% in the yr-ago period... The company noted that it was experiencing record levels of usage across its network.
The latter is particularly important as that appeals to advertisers from whom GNET generates the bulk of its revenues... In a recent industry report, GNET was listed as the #9 most visited media network site.. Aside from ad revenues, the company also benefits from subscription and transaction fees from its sites.
By and large, GNET's efforts are focused on small business services, personal investing, web search, and online gaming... Its success in these areas, its business model, and its growth prospects were given added credibility in June by Paul Allen who took a 34% stake in GNET for $426 mln.
GNET is projected to earn $0.34 per share in FY00, and that estimate has come up $0.07 in the past 60 days... Its 5-yr projected growth rate of 51.5% is roughly in line with its peer group and is more than 4x that of the overall market.
Like any other Internet stock, sentiment is a big driver of GNET, but time and again in its brief public history, buying the dips has proven to be a rewarding strategy... Take note, though, those dips can be pretty severe as GNET fell 55% from its April peak before rebounding, and then fell 52% from a subsequent peak of 95 1/16 reached July 1 (it doesn't have a beta of 3.31 for nothing).
In short, patience has proven to be a virtue with GNET... While the risk-reward ratio is more bearish than ever (short-term) for the tech sector in our estimation, GNET's solid growth prospects, influential backing, adept management, and its positive earnings and sales momentum should remain supportive factors.
My colleague, Robert Walberg, pointed out recently that if you can't wait for the upcoming 15% (or so) pullback in the Nasdaq before jumping in, at least stick with the companies posting strong/accelerating top-line growth (i.e. GNET)... These are the stocks that will continue to lead over the intermediate- to longer-term... So if you get caught in the sell-off at least you'll be holding stocks that should lead the ensuing recovery rally.
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