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Internet Stock Review Online, Tuesday 7/07/98
Los Angeles 65....92F Sunny.
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Table Of Contents:
1. Welcome.
2. Six Month Review Part 3
2. New Buys and Sales On Wall Street.
3. Coverage Initiated or Dropped On Wall Street.
4. Big Movers On Wall Street.
5. Earnings (or lack of) Reports.
6. News Reported.
7. News Reported via Audio/Video.
8. News From Our Readers.
9. IPO's and DPO's.
10. Disclaimer.
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First we apologize for getting everyone all excited about a ISP that is
offering free internet service to 25 million subscribers. Yes, it is true that
they are offering this service. No, it will not appear as a Summer Watch List
stock today, but rather we will report on it next Monday--if everything checks
out okay.
In the meantime, one of the best ways to follow ISP's is here:
internetnews.com
and this
redherring.com
and this
redherring.com
But first a little about buying Internet stocks (or any stocks) on Margin. We
actually had quite a few e-mails questioning our anti-margin stance. Our
stance
is this: Margin--no. Diversification--yes. In regular stocks (Heinz, Coke,
Wal-Mart) twenty is the minimum amount of stocks you should own. If you are
overweighted in Internet stocks, you should probably bump that number to 30.
Example. Let's say you bought 1000 shares of DoubleClick (Nasdaq: DCLK) Monday
at $75. When your broker says will that be cash or margin, (similar in tone to
a Neiman Marcus clerk saying cash or charge) you say "margin." You are now the
proud owner of $75,000 worth of stock--borrowing $37,500. Eight hours into
Tuesday you still own 1000 shares of DoubleClick--but now it's worth $62,000.
Important point: you still owe (now and forever--or until you pay it back)
$37,500. In the real world, the one we live in, the value of your investment
hasn't dropped from $75,000 to $62,000. It has dropped from $37,500 to
$24,000.
That is a 34% whack. One day. Story not over. If it drops another ten points
tomorrow, your $37,500 is now $14,000. Two days. Game over. You can now count
yourself among those investors who consider the stock market rigged, nothing
but a big gamble, a place where the little guy can't get ahead and over-run
with vicious shortsellers and evil market makers. Will DCLK drop another ten
point tomorrow ? The possibility (not probability) on a scale of one to ten
is--TEN.
Still don't get it. Try this, and as sure as your sitting there--this happened
to someone today. You decide to bargain hunt (catch the falling knife) Monday
with Radiant Systems (Nasdaq: RADS)--not a Internet stock but a great example
nonetheless. The stock is off a high of $29 and is trading at $14. There is
one
Strong Buy, one Moderate Buy and one Hold on Wall Street. It looks cheap with
street estimates of $0.62 this year and $0.90 next year--it sells for three
times book and two times sales. Revenues jumped 72% to $21.5 million last
quarter. It even has a "touch" of Internetism with its Internet MiniKiosk
System and a web site. In the last few weeks it traded from $14 (the all time
low) to $17 and back to $14. So you buy 5000 shares (margin please) at $14 for
$70,000 borrowing $35,000. After all, it's down from $29--it can't go much
lower--if it gets back to $17 you'll flip it for a quick $15,000 gain. That'll
buy plenty of rum Runners in Jamaica. Then the unthinkable. It can't be. It
plunges to $7.00. In a day! Hello, let me introduce you to Mr. Margin clerk.
Yes, you still own 5000 shares of RADS--now worth $35,000. Yes, you still owe
$35,000. How's your math. You're wiped out. Zero. It's all gone. Honey, we got
to take back the Lexus. How embarrassing.
With that said, lets move along because we do have another addition (the
fourth) company to add to the Summer Watch List. We'll issue a press release
about the addition tomorrow. Read all about it after the final review of the
Original (remaining) Watch List companies.
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The rest of the Watch List. Prices and percentage changes are for six months.
N2K $19 5/8 (NASDAQ: NTKI). Up 34%.
Someone recently asked which is our favorite CD retailer to which we gave our
standard reply, we don't give advice. But there is something we really like
about N2K that we can't put our finger on. Maybe it's because in addition to
selling CD's on the Internet, it's their plan to eventually download and sell
CD singles via the web or because they will be producing their own label or
because they will be creating and running Internet radio sites or because they
will be running promotional web sites for music artist or because they are
selling advertising on their web site. Four moderate buys and one strong
buy on
the street. Looks to lose $4.28 this year and $2.57 next. Traded from $14 to
$34 to $14 to $22. We'd expect more of the same.
212-378-5555
<http://www.n2k.com>http://www.n2k.com
musicblvd.com
Chart: stockmaster.com
Hoovers: hoovers.com
Insider Trading: biz.yahoo.com
Short Interest: # 1,037,000
Omega Research $4.50 (NASDAQ: OMGA). Down 20%.
Stock charting software. Down from $11.00 (October IPO) via Robertson Stephens
and Hambrecht & Quist. Unknown. Reported a very un-internet 5% increase in
sales for the quarter ending March 31. Cheap by Internet standards at three
times book and three times sales. Worth watching and giving a call. Street
says
$0.26 this year and $0.38 next.
(305) 551-9991
<http://www.omegaresearch.com>http://www.omegaresearch.com
Chart: stockmaster.com
Hoovers: hoovers.com
Insider Trading: biz.yahoo.com
OnSale $26 7/8 (NASDAQ: ONSL). Up 190%.
The pioneer of 24 hour Online internet auctions. Sales for the quarter ending
3/31 were $40 million up from $12 million. Cowabunga. Cheap at 4 times sales.
While it has not had the Portal or ISP type performance or valuations, we
sense
a pent up demand which could explode at any moment. A sudden re-valuation
could
send smaller players like AllNet Services (OTC: AWEB) up in sympathy as
investors look for a cheaper way to play the industry. While not a household
name, it has managed to garner 5 strong buys and 5 moderate buys on the
street.
AND the street expects it to break into the black as early as next year after
an anticipated loss of $0.69 this year.
(415) 428-0600
<http://www.onsale.com>http://www.onsale.com
Chart: stockmaster.com
Hoovers: hoovers.com
Insider trading: biz.yahoo.com
Short Interest: #2,780,000
Realnetworks $40.50 (NASDAQ: RNWK). Up 191%.
A hot new issue at $12.50 which ran to $19 and then back to $14 giving
everyone
the opportunity to get in. Then it absolutely screamed to $40 in the month of
March alone. Then it did a sickening death spiral back to $20 before again
ripping up the track to $40 and again in a month. This is the undisputed
leader
(at least today--with an 85% market share) in software giving viewers and
broadcasters the ability to see and hear things on the internet. We can
envision a variety of ways that it can start generating revenues out of the
blue--but they're too esoteric to share. Not for the faint of heart or even
your everyday river boat gambler because
>>>http://www.windowsmedia.com/guide/en/redirect.htm
206-343-1825
<http://www.real.com/>http://www.real.com/
realplanet.com
Chart: stockmaster.com
Hoovers: hoovers.com
Insider trading: biz.yahoo.com
Short Interest: # 754,000
Scoop $0.25 (NASDAQ: SCPI). Down 73%
Looks like it's all over for Da Scoop. Public at $4.50 through the Shamus
Group
(who?) it traded to $7.00 and then submerged to under a buck. We were never
convinced that it had a viable business plan at $29.95 per month to clip
articles. Now it appears that...well they got delisted June 24th. Buh-Bye.
(714) 225-6000
<http://www.scoop.com>http://www.scoop.com
Chart: stockmaster.com
hoovers.com
Insider Trading: hoovers.com
Short Interest: # 0
USWEB $22 11/16 (NASDAQ: USWB). Up 142%.
Did you see that full page ad in the WSJ. Probably the most ambitious internet
company, you build a web-site and they'll keep it going. And they mean for
everyone. How good are they ? They just landed a $10 million contract with NBC
and that made NBC only the fifth largest client they have. This was a start-up
a few years ago. That's why you just can't discount any of the start ups. The
internet is truly the great equalizer. Sales of $1.8 million in 1996, $19.7
million in 1997 and $20 million for the first quarter. In hindsight--this
might
be a Growth By Acquisition play. Unknown, despite the WSJ ad. Has three
moderate buys on Wall Street.
usweb.com
Chart: stockmaster.com
Hoovers: hoovers.com
Insider trading: biz.yahoo.com
Short Interest: # 1,700,000
Final note: A subscriber pointed out that Interactive buyer Network does
have a
web site>>>
vsource.net
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Summer Watch List # 4.
Digital Courier Technologies (NASDAQ:DCTI) $11.00. Ever hear of the benefit of
the doubt. If these folks don't earn it--no one does. We have bad news, good
news, and even more good news. The bad news is this was among our original
list
of Summer Watch candidates at $5.00, after a stock broker brought it to our
attention and when it was called Datamark Holdings.
At the time they described themselves as a direct marketing advertising agency
with a business model like a national network television. Say What ? Virtually
the same day and out of the blue it traded to $7.00 and we lost interest and
then stopped watching it altogether. Now the good news. At $11.00 it looks
better than it did at $5.00. Even more good news it traded down 22% today
after trading as high as $17.
We'll be brief and have a more detailed report tomorrow--but for now--what all
the Hub bubb is about is VideosNow.com. Again out of the blue, (they had
BooksNow, WeatherNow and WorldNow) they announce a 100,000 title catalog and a
huge deal with America Online and then that AOL suddenly owns 12% of them.
This
is grand slam, triple home run, hat trick. The Internet is truly the great
equalizer and it is why you cannot discount any of the start-ups. Have we ever
mentioned that ? We think they should change their name to OutOfTheBlue.com
It
looks rich at the moment with a $70 million market cap versus a few million in
sales--but we believe that is all about to change quickly.
dcourier.com
videosnow.com
weatherlabs.com
(Caution: Their sites have more cookies than Keebler, change your browser to
"accept" before entering or you'll never be able to get in or out.)
News: biz.yahoo.com
Chart: stockmaster.com
Hoovers: hoovers.com
Insider Trading: biz.yahoo.com
Short Interest: # 0
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As promised the article on InterVu from Red Herring.
redherring.com
Good article on CD advertising from the Internet Advertising Report.
internetnews.com
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Please see the disclaimer at the web site and your sign up confirmation
letter. And again, remember this is not a buy list. It is a watch list. We
are either doing business with every company on the list or we would like to.
So..as we said many times before--we are not impartial. We love everyone.
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