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Strategies & Market Trends : Cents and Sensibility - Kimberly and Friends' Consortium -- Ignore unavailable to you. Want to Upgrade?

To: Autumn Henry who wrote (81796)	3/3/2000 1:36:00 AM
From: Jerry S.	Respond to of 108040

EWBX - The following is an excerpt from a Merrill Lynch Research Report (Henry Blodget) released today: Investment Highlights: o Not unlike many internet content names, EWBX shares are substantially off of year end 1999 levels. Both large and small cap names are down: YHOO, is down 33%, DCLK and AOL are both down 39%, MYPT is down 46% and ETYS is down 80%. o EarthWeb has made several announcements which speak to the growing strength of its businesses. Dice.com, EarthWeb's job site, now has 200,000 job listings, up from 180,000 just a month ago. Dice now has 5,400 listing customers, already above our estimate of 5,100 for the quarter's end. Dice has been named exclusive provider of IT job listings to Go2Net and Dilbert.com. o Two weeks ago, EarthWeb acquired two IT certification companies and a leading online technology website. We think the market has overreacted to the investment required in these businesses, which is slight. o We have revised our model to reflect revenue upside and modest cash earnings dilution from the acquisitions (EarthWeb has so few shares out that a small earnings change impacts EPS). Our new 2000 and 2001 estimates are $64mm and $102mm in revenues and d$2.46 and d$0.63 in adj. EPS. On a relative basis, we think EWBX remains extremely undervalued-at 5x 2000 and 3x 2001 revenues. A variety of conservative valuation methodologies suggest that EarthWeb should be double its current stock price. Two weeks ago, EarthWeb announced the acquisition of two IT certification companies and a leading technology community website. These businesses will require slight additional investment this year, and the market is increasingly penalizing internet companies for making dilutive acquisitions. We believe the market has overreacted here, however, and is not recognizing EarthWeb's unique ability to monetize these assets. We have revised our model to reflect revenue upside and modest cash earnings dilution from the acquisitions (EarthWeb has so few shares out that a small earnings change impacts EPS). Our new revenue estimates are $64mm and $102mm in 2000 and 2001, up from $61mm and $96mm. Adjusted EPS is now d$2.46 and d$0.63 in 2000 and 2001, down from d$1.97 and d$0.52. (In 2001, the acquisitions are slightly accretive on an EBITDA basis.) On a relative basis, EWBX we think is extremely undervalued-at 5x 2000 and 3x 2001 revenues. A variety of conservative valuation methodologies suggest that EarthWeb should be double its current stock price. On a standalone basis, we believe that Dice is worth 20x this year's revenue estimate of $33 million, or $660 million. This suggests that Dice alone is worth $53 per share. If we value EarthWeb as a traditional content company, on an EBITDA multiple basis, we derive a share price of nearly $50. If EarthWeb is generating $200 million in revenues in 2003, and $50 million in EBITDA (a 25% margin), a 20x EBITDA multiple and a 20% discount rate suggest a current price of $46.