THE MOST BULLISH MAN ON THE PLANET
By Peter D. Henig
Red Herring Online
August 4, 1998
redherring.com
When Keith Benjamin, Internet analyst with BancAmerica Robertson Stephens, talks about the Web, he speaks in absolutes.
America Online (AOL) and Yahoo (YHOO) are the "landlords" of the Internet -- the "Mafia," even. CDNow (CDNW) and N2K (NTKI) are "shorts to zero". Amazon.com (AMZN) is the "Wal-Mart of the Web." And Internet advertising dollars are "bribes" and "extortion money."
Bribes and extortion money? Did we hear right? Mr. Benjamin is even long Yahoo and AOL. (Well, if you could own shares of the mob, you'd be long on them too.)
To put it mildly, such comments represent a refreshing change from the toned-down conclusions of most analysts. But the crowd at Robertson Stephens' New Millenium conference in San Francisco ate it up, barely containing themselves when Mr. Benjamin crowed that AOL would report a blowout quarter, while ETrade (EGRP) was the best Internet value in the market. (We heard more than one cry of "Excuse me, I have to call my broker.")
More equal
The one problem with Mr. Benjamin is that whatever company or stock he is talking about automatically becomes the one stock to buy.
Here's a sample. "If we have to pick just one stock to own, it has been, and will always be, Yahoo."
Oh, really? What about this: "If we could find just one Internet-enabled company, it has to be Getty Images (GETY). I'd love to find another one just like it."
And this: "Over the next six months, there will be more news, more positive surprises, out of AOL than almost all of the other stocks combined. Going forward, you simply have to own this stock."
Does this mean Mr. Benjamin is blind to the market's weakness around him? Hardly.
In fact, Mr. Benjamin began his conference speech with two warnings. First, that Internet stocks would continue to be soft through August. And second, that the Web must continue to grow at phenomenal rates -- doubling and possibly tripling its total number of users by 2000, hopefully aided by major improvements in bandwidth -- in order for Internet stocks to maintain and improve upon their current valuations.
And what if one, or both, of these doesn't happen? "Then they're all shorts," concludes Mr. Benjamin.
A retail evangelist
But Mr. Benjamin's comments weren't limited to stock recommendations.
At the same time he was pumping Amazon, CNet (CNWK), Yahoo, and Excite (XCIT) for all they were worth, he was also issuing warnings to his investment banking brethren that unless Wall Street offers an olive branch to its retail customers, they will be lost forever.
"We must reach out to retail and grab them back in," said Mr. Benjamin, highlighting ETrade both as a stock and as a company with an online strategy destined to doom Wall Street's traditional retail brokerage presence.
"ETrade is one of those companies that can hurt my business by as much as 30 percent, and that scares me."
With that said, however, the analyst was also beating the drum that ETrade is currently the best value among all of the Internet and e-commerce stocks. "Take ETrade's market cap, strip out its cash on hand, and you have its replacement cost. To me, that's great value."
What are not currently great value, according Mr. Benjamin, are Yahoo and Amazon. Despite his bullishness and Buy recommendations, Mr. Benjamin considers Yahoo at least two quarters ahead of itself on an advertising-revenue basis, while Amazon remains overvalued under any current valuation metric. "Amazon has 3.1 million customer accounts with repeat orders representing 63 percent of sales," said Mr. Benjamin. "Unfortunately, even with earnings of $1 to $2 per share, it still doesn't justify the stock price."
So buy, he says, but only when you get a good price. When will that be? Your guess is as good as ours.
Then again, no one ever said Internet stocks would keep going up forever.
"But I still want you to write about Getty," said Mr. Benjamin. "We dream of finding the next Getty. It's one of the best stocks we own." We heard, we heard.
Does this guy really believe everything he says? "I believe about half." And the other half? "Definitely spin."
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