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Technology Stocks : eToys Inc. (ETYS) -- Ignore unavailable to you. Want to Upgrade?

To: Jay Fisk who wrote (1104)	4/28/2000 7:41:00 AM
From: Joe Mintz	Read Replies (2) \| Respond to of 1330

1. The stock is undervalued relative to its long-term outlook, given the fantastic growth that will characterize e-commerce. This particular area, children's products, will also probably expand faster than the average. Etoys is the top tier player. Recall, we're talking about explosive growth generally. Furthermore, expansion into Europe will allow for even more substantial opportunities. 2. A 20% margin represents a solid figure, relative to the retail sector as whole, but also on its own. I would have more concern with a number around 5-10% or less, but I disagree with the notion of 20% being paltry. The company is already making sales in excess of 120 USD million per fiscal year, with sizzling growth. When the 1 USD billion benchmark is hit, within a few years, the 20% margin will correspond to around 200 USD million. Thus, rocketing revenues will translate into sizeable profits as expenditures are eased. With some vision, we can foresee a time with 5 USD billion in revenues, which translates into 1 USD billion based on the 20% figure. (Vision can be as important as anything in successful long-term investing.) I am not going to haggle over forecasts of future sales and spending. It seems that, encouraged perhaps by the current wave of anxiety, many analysts and investors are forgetting about how rapidly the e-commerce sector is poised to expand over the next few years. These trends will pull stock prices with them over long enough holding periods. 3. The management is sound. This may or may not hold true for other internet companies. The CEO has years of experience in the field, and the technical crew has peak skills. You can get an idea of who is running the ship by going to www.etoys.com, then to investor relations. Upper management will continue to prove key for stock price movements (look at Welch and GE). This factor speaks in our favor. 4. This stock represents a choice holding in a sector that has been beaten down excessively over the past few months. Sentiment still lies near a trough. Typically, the high point of pessimism in an industry provides a buy signal for the stocks in that group. The odds of success increase for the best candidates within that sector. 5. The retail sector should not be neglected in a diversified portfolio. Many of the outstanding stocks in history have been highly successful retailers. Such companies will always play an important role in the economy although the nature of their activities may adapt over time. The top internet retailers will grow much more quickly than traditional retailers generally. Other technology stocks can possess significant risk. Without going into details, even companies with good products may fail due to marketing weakness (they could learn something from companies like ETYS); competition is often underestimated. R&D expenditures may yield disappointing results in terms of practical output with profit potential. Doubtless, there exists a huge variety of enterprises, and it can be difficult to anticipate the likelihood of success in each particular instance. But then, that is exactly why one should diversify. Especially into well-positioned companies in temporarily out of favor industries with strong long-term outlooks. 6. There is no guarantee, especially in the short run. The odds will, however, increase with the holding period. Those who still cling to the meltdown scenario can persist in trying to short for small gains at considerable risk, but they are playing with fire. Whether or not they lose the shirts off their backs, they will probably help contribute to future upside volatility. 7. The possibility of a takeover bid may re-emerge as calm and rationality return to investors' attitudes toward the internet retail sector. 8. Conflicting opinions are not entirely a bad thing for a stock. They can provide leeway for upward action as short sellers capitulate and new buyers enter based on improved understanding. I like the fact that some people disagree with the outlook I have expressed; often unanimous opinion can spell danger. Only a question of patience. Good luck, JM

To: Jay Fisk who wrote (1104)	5/3/2000 8:01:00 PM
From: David R	Read Replies (1) \| Respond to of 1330

The marketing cost per customer are gross. The real question is what will etys ever have to do to make money. With recent results from amazon, it is clear that the virtual store is not quite living up to its expectations. The margins are razor thin, and the marketing costs are huge. There is tremendous value to having a toy store within a few miles of the house. Inevitably, that is the first place most think of when they need a toy. Not to mention that the cost of the toys are near equal, there is no return hassle, and you get the toy instantly. The bottom line is most toy shoppers prefer a local toy store. Toys R US can afford to have a money losing online store as a loss leader to their retail (i.e. Click and Mortar). etys can not afford to lose money, and they have not proven that they can make any. I do not belive that $8 represents a fair price. I think that etys is still overvalued. $3-$4 would be fair.