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More foreward thinking, y'all:
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Date: Fri, 31 Jul 1998 16:24:23 EDT
Subject: Raging Bull's Cyberstock Investor Report
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Internet Stocks: Buckle Your Seat Belt- We'll Show You How
Inaugural Issue - July 31
By Matthew W. Ragas, Editor, "CyberStock Investor Report"
No sector has enjoyed more of a dizzying run this past year than Internet
stocks. Anywhere any investor seems to turn these days they are bombarded by
news about the next highflying Internet stock. Be it a sizzling Internet
I.P.O. like Inktomi (INKT) or possibly DoubleClick (DCLK) - the home runs just
seem to keep on coming. Even penny stock hucksters have gotten into the
action, hyping proverbial stinky stocks such as ProNet Link (PNLK) to new
levels before watching dumbfounded investors wise up and hit the exit in
related stocks have generated more postings, rumors, arguments and name-
calling among investors than any other area of the market. In the madness,
some hedge fund managers have attempted to "short" many of these Internet high
flyers only to watch in dismay as these Internet stocks continue to rise.
Analysts attribute much of the Internet stock sectors recent rise due in large
part to the enthusiasm of retail investors using online brokers to continually
scoop of more of their favorite Internet stocks.
Heck, after getting burned one too many times, some hedge fund managers will
no longer even take positions in Internet stocks.
"I can't imagine anyone who is still shorting these guys," remarked Randy
Hanley, an analyst at Duncan-Hurst Capital Management. "I got out of this game
a long time ago."
While financial stocks have also enjoyed a nice run this year, nothing seems
to be able to beat the "sexiness" and intrigue of Internet stocks. Even
Internet companies that have amounted staggering financial losses to date such
as CitySearch (over $58 million), have recently filed for an IPO.
In this mad dash of Internet companies filing for initial public offerings,
these upstarts have attracted some of the most respected underwriters in the
business. Well known high tech underwriters such as BancAmerica Robertson
Stephens, Merrill Lynch, J.P. Morgan, D.L.J. and Morgan Stanley are all on
board for future Internet IPO's that will be hitting the market within the
next two months.
These underwriters clearly aren't fools- they know these shaky Internet
startups such as CitySearch will most likely be met with open arms by retail
investors. Because after all, let's face it, they have the magic word
"Internet" in their prospectus- what could be better. Now if only the boring
profitable companies of the world could be so lucky.
It's easy to see why many mom and pop investors have fallen in love with the
Internet sector. Internet stars like online book retailer Amazon.com (AMZN)
have gained 1300 percent in only one year. Other big gainers for the first 6
months of this year include sports site CBS Sportsline (SPLN), service
provider Earthlink (ELNK) and search engine Infoseek (SEEK) each up over 200%
While the prices of most Internet stocks to date have collectively risen, the
Internet sector has still not been without its share of losers. Witness the
troubles of digital payment pioneer CyberCash (CYCH) who, after laying off 20%
of their employees and posting sub-par earnings, has watched their share price
tumble 5% off their previous highs.
Even previously stable brick and mortar retailers such as The Sharper Image
and the AudioBook Club (KLB) has not been immune to the volatility of the
turbulent world of Internet stocks. The Sharper Image (SHRP) , watched their
share price rise from 6 3/8 to 7 15/16 on May 20, the day after the company
announced they would be releasing a new "enhanced website." Obviously, this
not news would not immediately even add a nickel to the company's bottom line
but was a press release that was met with open arms by hordes of day traders.
Turnover and trading volume in some of these Internet stocks has been
staggering. Take reborn "Internet Company" Zapata Corporation (ZAP) for
example. Two months ago, Zapata, a current investor in two fish oil and
sausage casings companies, announced they were planning a strategic move to
become a major investor in the Internet. Zapata was even bold enough to offer
$1.5 billion in stock to acquire leading search engine Excite (XCIT) that was
rebuffed. On July 6, Zapata announced they were investing in or acquiring 21
different Internet sites.
That day of trading shares nearly doubled to $21 up $11 for the day. Even more
remarkable was 11 million shares were traded, making the previously thinly
traded Zapata the most actively traded stock on the New York Stock Exchange
the day of the announcement.
Another re-born Internet company, Audio Book Club (KLB) saw their share price
rise more than 200% in three days of trading after announcing that it had
increased its membership base to 340,000 members through Internet advertising.
The frenzy of trading in Audio Book Club stock was almost 15 times over the
three-month daily average.
While companies such as K-Tel (KTEL), Audio Book Club, and The Sharper Image
have provided added excitement for investors, it has been the four major
search engines who have really set the ground work for this Internet
investment feeding frenzy.
The competition among the major Internet search engines such as Yahoo (YHOO),
Infoseek (SEEK), C-Net's Snap (CNET) , Excite (XCIT) and Lycos (LCOS) have
continued to heat up the group's share prices. The cyber battle lines have
been drawn as all of these companies seek to become the repeat "portal" or
return destination of choice for frequent Internet surfers.
A "portal" is a term used to describe one stop web sites that offer services
such as free email, news, free homepages, search directories, and other
services. The term "portal" is probably a word we could all live without
hearing at this point, but it is definitely music to the ears of search engine
shareholders, or should they now be called "portal" shareholders?
Nonetheless, C-Net's recent partnering with NBC and Disney's subsequent
investment in Infoseek are definitely the foreshadowing of more traditional
media companies partnering with the search engine crowd in the near future.
At the same time, truckloads of future Internet I.P.O.'s are in the pipe,
including well-known names such as broadcast.com. Pointcast, Cyberian Outpost,
CitySearch, 24/7 Media and GeoCities. Judging by the current hunger for
Internet issues, this should keep investors fed for the next few months and if
they really stuff themselves- maybe the next few weeks.
Already, according to online newsletter IPO Monitor, in the first 6 months of
this year 10 Internet companies have gone public raising $514 million. This is
more than double the $218 million that was raised by 11 Internet companies for
the same period last year.
Vole, Brown, Whelan and Co. analyst Andrea Williams believes the increase is
due in large part to the demand by investors to invest early in these new
issues. "The portals-type stocks are very expensive and investors are looking
to get into this sector at a cheaper value," remarked Williams.
Clearly in the not too distant future, Internet stocks will have to start
showing a combination of real earnings along with increased market share to
justify their current lofty valuations. Surely, some Internet stocks at that
point will be able to back up their share price with increased revenue and
growth in overall users, while masked imposters will be left flailing in the
breeze. Don't kid yourself, just like the biotech stock craze of the past,
Internet stocks one day in the near future will also have to justify their
share prices with actual numbers.
This doesn't necessarily mean these stocks will be judged entirely by
financial measures- such as revenue growth and quarterly earnings. It is this
shift in understanding the proper measures used to value Internet companies
that have left some traditional investors perplexed.
Robert Stovall, president of Stovall/21st Advisors remains one of these
perplexed investors who is caught off guard. Stovall now has men at his
neighborhood store asking him for thoughts on Excite and Lycos stock. "It's on
the unbelievable side," Stovall says. "I hope it's individuals having fun and
not serious investors." Many of the more established Internet players aren't
even estimated to show a profit before 2000. More than likely, a combination
of valuation measures such as increases in market share, page views and unique
visitors, along with quarterly revenue figures and cost per user, will be used
to value these Internet stocks. This current nirvana can't and won't last
forever for all of these stocks. Even with he huge exponential growth of the
Internet there is still only so much prime virtual real estate available for
purchase, and like in any business environment, there are always a fair share
of winners and losers in the end.
It iss for this reason that The Raging Bull and myself will soon be releasing
a free weekly e-newsletter called "The CyberStock Investor Report," crafted
especially for the Internet investor. The "CyberStock Investor Report" will
feature my own lively commentary each week that will hopefully help put all of
the mergers, acquisitions, partnerships, earnings announcements and other
shenanigans of these Internet companies in proper perspective. In an easy to
read format, I'll share with you my thoughts for the past week and let you
know where I believe this sector is heading. In short, we can ride this crazy
roller coaster together.
The newsletter each week will also present you with summaries to the important
news stories for all publicly traded Internet companies for the past week. We
know that if you're like most investors you don't have 8 hours a day to track
these Internet companies. So we simplify things and do all the tedious leg
work for you.
Each week you'll get a summary of all of the important announcements these
companies have made to the public. We'll even include important summaries of
news from hot private Internet startups. These are the same types of Internet
startups who we believe could I.P.O. in the near future.
While we will attempt to bring you summaries of all important Internet company
news for the past week, we'll also present you with a list of links in each
newsletter. These hand picked hot- links point to stories published on the Web
in the past week that we feel are an important and useful read for any
We'll also bring you snapshots of any Internet companies that have filed for
an I.P.O in the past week. The newsletter will also be packed with all
analysts' upgrades and downgrades of any Internet company for the past week.
You can rest assured that we will also include earnings surprises for all
Internet companies around earnings season. With all of this valuable
information in hand each week in one easy to read newsletter you're sure to be
a step ahead of the yahoo (pun intended) down the street.
Of course, this newsletter is made for the Internet stock investor- so we
definitely want to hear from you. Each week the newsletter will also feature
your own select thoughts and comments that you have e-mailed us in the past
week about the Internet economy. Because when it comes down to it, who
understands the Internet economy better than the people who are investing in
it. To top it all off, we'll feature not only your own comments but will also
bring you exclusive comments and analysis from some of the Street's leading
analysts, reporters and
cyber pundits each week.
Finally, the newsletter will have a number of other exciting features
including the CyberStock Index designed exclusively by Raging Bull. We believe
this index composed entirely of true Internet stocks presents the clearest
overview and representation to date of the Internet stock sector. We invite
all newsletter readers to use the CyberStock Index updated throughout the day
to keep an eye on the overall ups and downs of the Internet stock sector each
day. It should be a lot of fun.
We look forward to hearing from you and becoming a subscriber to "The
CyberStock Investor Report" today. This is the first true newsletter dedicated
exclusively to covering Internet stocks- don't miss out.
The Raging BullTM aims to provide a forum for investment ideas. Our articles
and columns should not be construed as investment advice, nor does their
appearance imply an endorsement by Atlas Internet Ventures, Inc. of any
specific security or trading strategy. An investor's best course of action
must be based on individual
circumstances. This material is for personal use only.
Copyright 1998, RagingBull.Com