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Technology Stocks : OnSale Inc. -- Ignore unavailable to you. Want to Upgrade?

To: Irene Lynn who wrote (1229)	7/16/1998 12:54:00 AM
From: StaggerLee	Read Replies (2) \| Respond to of 4903

>>expects retail electronic-commerce market to grow to $24.2 billion by 2002 from $2.6 bln in 1997; Unfortunately, even a 10-fold increase in revenues doesn't make ONSL a good buy at these levels. ONSL had $40 million in revenues in the first quarter, which annualizes to about $160 million. A ten-fold increase would put sales at $1.6 billion (it will never happen, but that's a separate issue). The current 9% gross margin means gross profit of $150 million. So, if SG&A increases just 4-fold over the same period (ie, from $36 million annualized now, to $150 million in 4 years), the company still isn't profitable! Not to mention all the new shares that will have to be issued to pay for 4 years of losses. EVEN A 20-FOLD INCREASE in revenues only gives ONSL an after-tax profit about about $10 million, or about $.50 cents a share, and a PE of about 50 based on today's prices. This company's business plan is simply flawed. What other companies can grow their revenues 10-fold and still not be profitable! If you're hoping for another quick, hype-driven run-up, good luck. But long term this stock is a loser.