RE: ONSL:
THE RAGING BULL'S CYBERSTOCK INVESTOR REPORT
"Your Weekly Internet Stock Newsletter"
December 31 - Issue: 1.22
"Now Read By Over 40,000 CyberInvestors Weekly"
Editor: Matthew W. Ragas
ragingbull.com
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***RAGAS SPEAKS FOR THE WEEK***
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Happy New Years!
JESUS2000.com TO GO PUBLIC...
No it's not a joke-far from it actually. Jesus2000.com, a Web site promising
"virtual pilgrimages to the Promised Land," has announced plans for an IPO in
the spring of 1999. The site hawks a variety of products ranging from religious
books and CD's to rosary beads, wooden crosses, and, of course, pilgrimage
travel reservations. The site also offers friendly reminders such as "Be ready
for the return of the Messiah!" I wonder if this news has DIDAX INC. (AMEN),
creators of vertical Christian portal site crosswalk.com, shaking in their
boots?
FIVE NEW INTERNET IPO'S ON TAP...
The rush by fledgling Internet companies filing for IPO's continues. While
investors were relaxing this holiday season, numerous Internet companies were
apparently hard at work putting the finishing touches on their S-1 forms. Net
investors can now look forward to early '99 IPO's of not only MarketWatch.com,
iVillage.com, Vignette and barnesandnoble.com, but also 5 new companies that
have joined the Internet IPO pipeline in the past two weeks.
These companies include online guide site The MiningCo., auction site
Priceline.com, Net analysis software firm WebTrends, and OneMain.com-a regional
ISP pursuing a rural and small town ISP roll-up strategy. As planned,
Ziff-Davis officially filed for an IPO of ZDNet, their network of tech news
sites.
ARE INVESTORS STILL IGNORING ONSALE?
According to recent trading activity in the stock market, being first to the
party isn't always best; just ask online auction site ONSALE. The company,
founded by entrepreneur Jerry Kaplan, went public in April of 1997. As shares
in hot Internet stocks such as Yahoo! and AOL went through the roof in 1997,
gains in ONSALE's stock remained moderate. At that time, investors didn't think
of online auction sites as sexy Internet plays.
Flash forward to September of this year. Competing online auction site eBay
went public at an $18 target price that more than tripled on its first day of
trading, giving the company a market cap of close to $1.9 billion. (This cap
now seems quite tame as eBay's valuation currently hovers around a staggering
$9.9 billion.)
This was just the kind of one-day run up sure to give Kaplan fits. Where was
the Street's respect for his better-known and established ONSALE?
What Kaplan failed to realize, however, was that investors' love affair with
Internet auction site IPO's had only just begun.
Another ONSALE competitor, uBid, a spin-off from Creative Computers, went
public in early December at $15. The company's shares soared as high as $60 1/2
before closing its first day of trading at $40. Once again, an Internet auction
site hit a homerun.
Finally, ONSALE got invited to the party. Industry analysts and Internet
pundits began proclaiming that shares of ONSALE appeared undervalued when
compared to the meteoric price run up in eBay. Ah, justice at last. During the
mad dash for Internet auction company shares, ONSALE saw their share price
rocket to an intraday high of $108 on November 30th.
But ONSALE's apparent surge of interest from the Street and tech stock-happy
day traders was short lived. Shares retreated to close the day at only $48.
Since then, ONSALE's price has continued to hover around its November 30th
closing price and, as of December 30th, the company sports a market
capitalization of approximately $779 million.
So how does this valuation stack up when compared to competitors such as uBid
and eBay? Currently eBay's market cap sits at around $9.9 billion. uBid on the
other hand has a cap of approximately $1 billion.
So is ONSALE currently undervalued? If you look at their valuation as compared
to those of their top two rivals, perhaps so. We could, of course, compare the
competitors' total number of customers, profit margins, number of items listed,
top line revenue growth, and-perish the thought- actual earnings. But the real
argument for being bullish about the long-term prospects for ONSALE rests in
the three key advantages they hold.
1) THE YAHOO FACTOR
In mid September, Yahoo! selected ONSALE's technology to create Yahoo!
Auctions, Yahoo!'s person-to-person auction site. When it comes to the Web, one
cannot find a larger and more significant partner than Yahoo! This agreement
makes ONSALE the key component in Yahoo!'s auction strategy and pits the online
media giant squarely against eBay-another person-to-person auction site. More
importantly, this Yahoo!/ONSALE auction offering undersells eBay by asking no
commissions, listing fees, or other charges. eBay, on the other hand, has
reached profitability on the high margins generated by a variety of such
service fees.
It doesn't take a rocket scientist to figure out that Yahoo!'s commission-and
fee-free auction offering, powered by ONSALE, has the potential to quickly eat
into eBay's business. Yahoo! has yet to spend on a splashy promotional or
marketing push for Yahoo! Auctions, but I am confident they will step up their
efforts in this area next year. When that happens, look out eBay! Advantage
ONSALE.
2) THE SOFTBANK FACTOR
In mid May, ONSALE announced a joint venture with Japanese conglomerate
SOFTBANK to establish online auction sites for the Japanese market. SOFTBANK is
currently the largest software distributor in Japan and their venture arm holds
stakes in over 60 Internet related companies, including GeoCities, Yahoo!,
Ziff-Davis and E*TRADE. While the Internet market in Japan is currently only
15% of the size of that in the U.S., it is expected to reach 33 million users
by 2001. Many Internet companies already consider it their top priority for
international expansion. So far, both SOFTBANK and ONSALE have launched
SOFTBANK Internet Auction, a business-to-business site that featured over 5,000
products in its first auction, early last month.
This powerful partnership places ONSALE in an early leadership position in the
Japanese online auction market and, more importantly, provides ONSALE with a
very powerful relationship to build upon. Related SOFTBANK venture capital
investments, such as online communities GeoCities, Zip2, TalkCity, Asia Online
and ThirdAge.com among others, appear ripe for significant ONSALE
auction-related deals. If ONSALE can continue to build on their SOFTBANK Japan
auction venture, they will have formed powerful alignment that other auction
sites simply cannot match. Once again, advantage ONSALE.
3) ZDTV: FIRST TO INTEGRATE ONLINE AUCTIONS AND TV
In mid-November, ONSALE unveiled an agreement with cable TV channel ZDTV, an
affiliate of Ziff-Davis, to launch ads that showcases ONSALE's live online
auctions. These commercials will air during ZDTV's Money Machine show, which
focuses on how to make and save money using the Internet. ZDTV and ONSALE will
use push technology to pitch fresh auction information to ZDTV's viewers every
15 minutes.
This marks a notable integration of TV and the Internet that other auction
sites have yet to tackle. ZDTV viewers also comprise an ideal audience for
ONSALE, since the new cable channel is geared to Internet-savvy users who are
likely to be interested in ONSALE's wide range of available computer products.
ONSALE's Kaplan believes that "customer interaction" is the key to his
company's success, and this deal with ZDTV clearly moves ONSALE closer than any
other auction site to the customer through exploiting a powerful new
advertising medium.
Further, ONSALE's partnership with ZDTV and experimentation with this
TV-Internet auction advertising gives them a leg up on the rush to develop
applications that work smoothly with high speed cable set top boxes and related
high speed Internet access devices. eBay and uBid, are you listening?
Finally, the gem in ONSALE's crown for the coming years would appear to be
their growing partnership with SOFTBANK and that company's related Internet
venture companies. The companies are already working together quite nicely.
For example, SOFTBANK is currently Yahoo!'s largest shareholder; not
surprisingly, the ONSALE Yahoo! Auction deal occurs. SOFTBANK and ONSALE have
also formed a joint venture in Japan. For over a year now ONSALE has enjoyed
multi-level sponsorships with Pointcast and ZDNet, both of which are SOFTBANK
related investments. Most recently, ONSALE announced their partnership with
ZDTV, an affiliate of Ziff-Davis and a wholly-owned subsidiary of SOFTBANK.
So who will ONSALE partner with next? Hard to say, but judging by Kaplan's
recent moves he clearly understands how to play the Internet auction game for
the long term. Congrats, Jerry, for picking SOFTBANK as your apparent long-term
partner. There appear to be a number of award-winning horses in the company's
stable of Internet venture investments which you can ride. And, at the end of
the day, lofty stock prices are nice, but they don't build successful long-term
category killers.
What will current Wall St. darlings eBay and uBid counter with to stay in the
race?
Your guess is as good as mine. One thing is clear, the stakes in the online
auction wars have just escalated. eBay and uBid may be winning the current
"auction" on Wall St., but my bid is on ONSALE.
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***WEEKLY PUBLIC INTERNET MARKET NEWS***
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ragingbull.com
-- E*TRADE Partners with CNNfn
-- TeleSave.com in Long Term Deal with AT&T
-- AOL Reaches 15 Mil. Member Milestone
-- Cyberian Outpost and Discover Card Partner
-- ONSALE Unveils Proprietary Tracking Tool
-- SkyMall Internet Sales Soar
-- CheckFree and Ameren in Bill Presentment Deal
-- RCN Integrates ISP Acquisitions and Launches RCN.com
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***WEEKLY PRIVATE INTERNET MARKET NEWS***
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ragingbull.com
-- VarsityBooks.com Launches Multi-Million Marketing Campaign
-- Millionaire.com Secures $4.5 Mil. in Financing
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***WEEKLY EARNINGS RESULTS***
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ragingbull.com
-- National Discount Brokers
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***UPGRADES, DOWNGRADES & COVERAGE INITIATED***
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ragingbull.com
-- Ziff-Davis
-- TicketMaster- CitySearch
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***QUOTE OF THE WEEK***
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"Entertainment and information and direct selling. I think that's the next
convergence. I think that's what's going to happen in the next several years."
-- Comments made this past week by Barry Diller, CEO of USA Networks on
"Moneyline News Hour with Lou Dobbs" regarding future trends for etailing and
his Internet venture- TicketMaster-CitySearch.
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***NEWS LINKS OF THE WEEK***
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Fools Will Suffer When Net Bubble Bursts - San Jose Mercury News
mercurycenter.com
Internet Is Only Part of Mogul's Media Convergence Strategy - CNNfn
cnnfn.com
Net Gets Geerlings & Wade Gidy - CBS MarketWatch
cbs.marketwatch.com
Jesus2000 to Go Public in Spring - Reuters
techserver.com
Web Portal Shakeout Predicted - E Commerce Times
ecommercetimes.com
OneMain.com to Build Bigger ISP - Bloomberg
news.com
Zapata: Net Fishing Again - Interactive Week
zdnet.com
Intuit CEO Wags Finger at Microsoft - Wired News
wired.com
Amazon Surprise- Double Revenue! - MSNBC.com
msnbc.com
Is It Time to Bail From Amazon.com? - Seattle Times
seattletimes.com
Portals Headed For Shakeout - ZDNet
zdii.com
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Copyright 1998, RagingBull.Com
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******another internet favorite of mine that should start getting alot of attention: TMCS...ticketmaster!
Happy new year everyone,
rhonda |
