INTERNET STOCK OUTLOOK: THE ONES TO WATCH IN 1999!
by Chris Agarwal
INTERNET STOCK NEWS™
internetstocknews.com
The Premiere Internet Industry Communication Vehicle
December 31, 1998
(In no particular order)
At Home (NASDAQ: ATHM): home.net, At Home is the leading high
speed Internet access company. Using cable modems to provide access, the company
can leverage users into dollars using a content network revenue model similar to what
media giants such as Time Warner and Viacom make billions from. At Home provides
Internet access at over 100x what your average ISP can provide and the stock is up
over 325% this year. Remember that almost every single year since inception, AOL has
increased in price upwards of several hundred percent. Looks to us like At Home is just
getting started.
CMGI (NASDAQ: CMGI): cmgi.com, CMGI is a publicly traded Internet
venture capital company. If you don't hear about this one in one year's time, we deserve
to be shot. This company owns large positions up to 100% complete ownership in over
20 leading Internet companies involved in content, e-commerce, advertising, marketing,
software, you name it! They are extremely profitable with over $1 per share in the past
two quarters and trade at a P/E ratio of around 50. The company has had the insight to
invest in AOL, Lycos, GeoCities, and many others and has received an almost 5000%
return on equity. This is an Internet giant that very few know about.
Etrade (NASDAQ: EGRP): etrade.com, You are probably all familiar with
this company. Etrade is the leading online broker. There are very few industries that can
reap large amounts of scalability from the Internet and online trading is, in our view,
currently #1. Simply connecting the trading system with a web interface and supporting
it with staff and marketing has allowed this company to become extremely profitable. As
other leaders in their categories such as Ebay, Yahoo!, and Amazon.com soar, what
happened to Etrade? We think that after a few run-ups and corrections the leaders will
be given higher valuations than usual essentially making them “Blue Chip” Internet
stocks. Etrade is the leader in its category and can easily use its clout to leverage
revenues out of many other finance-related practices.
Excite (NASDAQ: XCIT): excite.com , Everyone knows what Excite is.
The question is why hasn't Excite joined the ranks of the high-flying Internet stocks?
Share dilution and speculation is the answer. Ebay has some 3 million shares trading and
Ubid has less than 2 million. When millions of unsavvy investors place market orders for
these stocks they are bound to fly sky high. Market capitalizations are based on shares
outstanding but created from the demand applied to the float. Therefore, you get some
silly valuations. Any long term investor knows that Excite is considered to be #2 in the
Internet portal race and that, if any company deserves the some $15 billion valuation
given to Ebay, it is this one. When the shake out comes around and we know it will, the
high-flying low-float stocks will tumble downwards and the institutions will look for the
leaders in their category who have a history of knowing how to leverage users into
dollars. We think that they need not look further than Excite.
SportsLine USA (NASDAQ: SPLN): sportsline.com , This company is
working on #2 or 3 in the online Sports content sector and competes with ESPN.com
and CNNSI.com for online sports network. As the major players have clout, CBS has
branded this company and recently increased its ownership to over 10% with more
warrants purchasable at up to $30 per share. Sports is a huge industry. It will take years
for real sports fans to flock online but those years will come quickly. This company is
the first pure-play Internet sports brand similar to the pure-plays of Yahoo!, Ebay, or
Amazon.com that have been given high valuations. They suffered some because of the
cold Football season and non-existent basketball season but we think they are still a
strong contender. When sports get hot again, expect to see CBS SportsLine ads almost
everywhere and expect the fools who watch them, whether it be individual investors or
fund managers to go running to their trading stations.
Ticketmaster/CitysearchOnline (NASDAQ: TMCS): citysearch.com , If
there was ever a company whose growth prospects were ignored by the media, this is
it. While everyone says that the portal industry is changing and that the local portal
business will be huge, have they forgotten who is the leader in that industry? CitySearch
provides a brand name and backing by Barry Diller of USA Networks that we wouldn't
be surprised to see plastered over every wall next year. They are in New York,
Toronto, Nashville, Portland, LA and they are coming to a town near you! What better
way to start using the Internet is there than to visualize its interface as a friendly portal to
your neighborhood stores, activities, and surroundings? Clearly the leader in its
category, based on its market cap. , they have already experienced a behind-the-scenes
run-up twice that of Ubid or half that of Ebay's. Who knew?
Peapod (NASDAQ:PPOD): peapod.com , Once again, if you are looking
for a company that is the leader in its sector and that no one has heard of, here it is.
While most of us continue to shop for groceries by visiting the store braving crowded
parking lots and long lines, there is another type of shopping going on elsewhere in
which the store is brought to you for less! This is Peapod, the leading national online
grocery store. While there is less scalability in this industry then in others, there is little
overhead because there is no physical store needed and less marketing needed because
much can be done online. They have the brand name, the following, and the experience.
If anyone can implement the idea on a national basis, Peapod can.
Real Networks (NASDAQ: RNWK): real.com , Real is the leader in
Internet broadcast media and Internet investors are shallow to say the least. Fickle day
traders and Internet newbies have spent far more on a web site called Broadcast.com
than they have on the content and technology that would even enable that web site to
exist. Real Networks provides broadcast content using the Real Player software
downloaded to over 70 million PC's and specific channels such as Bloomberg and ABC
News. Once broadband access becomes popular, watch out. A partnership with
someone like At Home could be even more scary. We are talking about the media
networks of the future. A buyout may be a strong possibility also. A company like Time
Warner could get their paws on 70 million PC's for chump change if they wanted to.
Will Rob Glaser stubbornly hold out is the question we ask.
DoubleClick (NASDAQ: DCLK): doubleclick.com, This should be a
no-brainer. Internet advertising is supposed to reach billions of dollars by the year 2000.
Who is the leading Internet advertising agency? You guessed it. What type of valuations
do leaders get? Yahoo!'s got $24 billion, Ebay has $10 billion, and Amazon.com has
$17 billion. DoubleClick hasn't even a billion. Go figure.
Onsale (NASDAQ: ONSL): onsale.com , While greedy and
unsophisticated investors place their bets on Ubid, Ebay, Cyberian Outpost,
Amazon.com and other e-tailers, they have almost forgotten about the founder of large
scale e-commerce. While AOL has spent years achieving 15 million subscribers did
someone forget that Onsale has spent far less logging 9 million bids? With a major
alliance with Yahoo! to provide online exchange similar to Ebay as well as small
business auctions and everything from $99 Nintendo 64's to $12,000 Xerox copiers
being sold on their branded site, we think Onsale deserves some more recognition in
1999.
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