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Microcap & Penny Stocks : Bid.com International (BIDS) -- Ignore unavailable to you. Want to Upgrade?

To: William Whitehead Jr. who wrote (3891)	12/26/1998 1:35:00 PM
From: kidl	Read Replies (1) \| Respond to of 37507

BidCom mentioned in Globe & Mail Dec. 24: Bandwagon buyers take leap of faith Thursday, December 24, 1998 MARK EVANS You heard it here first, although it may very well be a figment of my active imagination. The Barenaked Ladies, one of Canada's best-known rock n' roll bands, want to capitalize on the frenzy surrounding Internet stocks by creating a new version of their 1992 hit If I had a Million Dollars. Apparently, the new song's working title is If I had a Billion-Dollar Market Cap -- not the most catchy title, but it captures the spirit of the Internet investment environment. Many stocks have soared on expectations that on-line retailing and advertising will see explosive growth. The investment mantra has become: Jump on the fast-moving bandwagon now. To put this phenomena in context, Yahoo Inc., Amazon.com Inc. and Ebay Inc. -- three of the hottest Internet stocks -- have a combined market capitalization of about $53-billion (U.S.) -- or $82-billion (Canadian). At four years old, Yahoo has the longest operating history while Amazon.com is the largest with expected sales of more than $500-million (U.S.) this year. Canada's five major banks, by comparison, have a market capitalization of $88-billion, millions of customers and corporate histories that date back to the 1800s. The banking and Internet sectors have completely different dynamics and growth prospects, but it boggles the mind how investors value Internet companies. It's hard to put the blame solely on investors, who obviously have visions of quick and hefty profits dancing through their heads. Analysts have also played a key role to create an environment flush with greed and irrationality. CIBC Oppenheimer analyst Henry Blodget did his part last week with his ultraoptimistic research report on Amazon.com, highlighted by a 12-month stock target price of $400. His report also included a five-year projection on the company's revenue and profits -- an ambitious move given it's difficult to predict where the Internet will go next month, let alone next year. The report was a bold move that likely served its function by getting Mr. Blodget and CIBC Oppenheimer a lot of attention. But not all of it was positive. One analyst called the report "irresponsible," and "science fiction." Mr. Blodget could become a hero if Amazon.com hits his target. Then again, he could land in the Internet's Hall of Shame if Amazon.com comes crashing back to Earth. The coverage of Internet stocks is perilous because it's difficult to predict with any kind of accuracy a company's growth, making the creation of an investment model a challenge, if not impossible. So how do you value an Internet stock? First, you throw traditional valuation tools out the window. Instead, a new set of methods must be created to take into account not only a company's long-term prospects but the future of its market. The problem -- or challenge -- is that there are so many unknowns that revenue and earnings estimates are, at best, guesses, and stock-price targets reflect the level of investor enthusiasm as much as anything related to fundamentals. The process is made even trickier by the fact there's no rhyme or reason about the way investors treat Internet stocks, even those in the same sector. While Ebay, for example, has become a $10-billion company, Canadian rival Bid.Com International Inc. has enjoyed a much more modest rise. The questions facing Internet investors are much the same as those faced by investors who bought or considered the purchase of Bre-X Minerals Ltd. shares. When you buy these type of companies, whose value is based mostly on tenuous prospects, it's a huge leap of faith. In the case of Bre-X, the company's claim that it had found the world's largest gold deposit turned out to be completely wrong, leaving an army of embarrassed analysts and burned investors. The same fate may meet Amazon.com, but your guess is as good as mine, and my guess is probably as good as many Internet analysts. Mark Evans can be reached at mevans@globeandmail.ca Mark Evans electronic commerce investments Internet Yahoo Inc Amazoncom Inc Ebay Inc