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Technology Stocks : Excite [XCIT], an exciting stock to own in 1999! -- Ignore unavailable to you. Want to Upgrade?

To: TLindt who wrote (695)	12/17/1997 10:42:00 PM
From: chirodoc	Read Replies (1) \| Respond to of 3183

Advertising Network: DoubleClick Seeks $228 Million IPO Valuation ...you probably saw this but i like the fact that they say that excite (and others) are the competition. this xcit ain't no start up anymore! By Steve Harmon Senior Investment Analyst Internet.com "Where Wall Street Meets The Web" It's getting to the plug and play initial public offering stage again with firms seeking about $200 million valuation from Wall Street on revenue multiples hovering at or near 10x. Click on DoubleClick's IPO plans and see how this one stacks up. At a time when AOL (NYSE:AOL - news) trades at about 6x revenue, Webvertiser CKS Group (NASDAQ:CKSG - news) under 2x, here comes DoubleClick looking for what our analysis shows could be 7x revenue. But let's take it a step further than this multiple. On a CPM (cost per thousand) basis, at a time when average CPM is $30 or 3 cents an ad view, DoubleClick wants investors to value its firm at 21 cents per ad view it delivered, about 900 million (900M divided by enterprise value). How's that for a different angle on values? Advertmania DoubleClickÿPro forma IPO valuation estimates ÿÿÿOffering 2.30 Greenshoe 0.35 Total offer 2.65 IPO target share price $ 13.00 IPO gross proceeds $ 29.90 ÿÿShares out pro forma 14.61 Plus warrants @ $0.66 wtd. Avg. 1.81 Plus incentive stock options 1.19 Fully-diluted shares 17.61 IPO market cap $ 228.88 Plus long-term debt - Less working capital $ 38.26 Less warrant inflow $ 1.20 = Enterprise value $ 189.43 ÿÿRevenue ÿNine months to Sept 30 $19.66Annual at that rate $26.21ÿÿLoss ÿNine months to Sept 30 -$4.61Primary share loss to 9/30 -$0.32ÿÿRevenue multiple ÿIPO enterprise value/annual revenue 7.2 vs. CKS Group (CKSG) 1.5 So the question might be: is there 18 cents of value per page view delivered in DoubleClick's value or technology to grab ahold of? The answer lies in DoubleClick's multi-tiered approach to ads. It delivers them in the DoubleClick Network, sells ad-management and direct marketing solutions. The latter two could be where the added values may be found. In short, yes. As category leader, DoubleClick seems to seek a slight premium to public companies in the network space and could expect a little latitude on valuation, in our minds, especially since it helped define the ad network in the first place. The Madison Avenue-based firm defied the old order and created something new and from the Net rather than trying to attack this space with old ideas. In many ways these new business models simply cannot nor could have existed in any other medium, except possibly cable TV where ad servers can dish out demographically-targeted ads across cable groups. But nothing as targeted as the Web and DoubleClick. Revenues through September 30 hit about $20 million, on track for $26 million at that pace. Losses reached $4.6 to Sept 30 or could be about $6 million this year. DoubleClick Network accounted for about 60% of revenue. On the don't sell all your eggs in one basket, Microsoft accounted for 10% of the firm's overall revenue and DoubleClick's top 10 customers made up 30% of its revenue. Some 800 advertisers from a variety of industries use DoubleClick Network, including many of the leading Internet advertisers. Names include Intel, Amazon, CDNow, BellSouth, IBM, GTE, Netscape, Microsoft. DoubleClick forecasts a $2.7 million operating profit next year on $27.7 million revenue (this data nugget was buried in the back of the S-1). We estimate that next year's revenue could surpass that figure and may approach $35 million. Operating profits are more difficult to forecast since DoubleClick employs 171 people, up from 13 in March, 1996. With the market for Web ads likely to be line-item in ad budgets in 1998 and in the multi-billion in total very soon, we think DoubleClick may have to continue to ramp up the intellectual capital (people) to compete in an increasingly competitive landscape. Biggest threats are AOL, Yahoo (NASDAQ:YHOO - news) , Excite (NASDAQ:XCIT - news) , Lycos (NASDAQ:LCOS - news) and MSN which deliver content and ad views in one package. They also have an international presence, something DoubleClick wants to increase. On the ad server side there's firms such as NetGravity to contend with or in banner ads, LinkExchange. The one advantage DoubleClick may have so far, in our minds, could be its comprehensive ad solution and time. An expected hot Web ad market in 1998 combined with these two elements may tell if both are enough to click with Wall Street.