eMailbag Monday: NetPerceptions, Upgrade, Research
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Hi Gus, I am a recent shareholder of Net Perceptions (NETP). What do you think? It owns a very
promising technology which has already taken the lead position in its industry.
I hate to see it "drowning." Tell me your opinion.
Reply: Net Perceptions is one of the early leaders in the emerging field of relationship marketing. However, it is now sharing the public stage with competitor Engage Technologies (ENGA) which went public recently. While the two companies have different technologies, both aim to tailor Web site content and recommendations to users based on profiles in order to increase sales and customer satisfaction. Engage seems to be growing more rapidly than Net Perceptions but not necessarily enough to justify the difference in price. With Engage's market cap at $1.5B and Net Perceptions' market cap at $321M, Net Perceptions does seem under-valued.
Net Perceptions just reported strong growth with sales growing from $1.9M to $2.8M from the first to second quarter. Engage, being a newly public company, has not yet reported quarterly results but it had revenue of $8.9M for the nine months ending April 30 and $2.2M for the 12 months ending December 1998, leading to expectations that revenues are growing very rapidly.
However, Engage is building a more diverse revenue stream which goes beyond software for relationship management in e-commerce. Engage has also developed an enormous database of more than 30 million consumer profiles and runs both an ad software management system and Web site analysis business, i/PRO. You might want to spread your risk over both companies in order to benefit from the expected growth in relationship marketing.
Upgrade, Smart Play?
Dear Gus, what's your opinion on UPGRADE (UPGD)? Also, isn't a rate hike also
good for Internet values and shouldn't they in contrast to all cyclicals lose
Reply: Internet Stock Report doesn't closely follow Upgrade International Corp. because it is not a pure Internet play. Like many technology companies, Upgrade has some technology that could gain enormous market share from growth in e-commerce but it is far from certain that the companies' smart card products will benefit from growing digital commerce. Smart cards have been tested for more than ten years with only the most modest success. The strong sales growth of sites like Amazon.com and eBay in conducting e-commerce using typed-in credit card numbers is not an encouraging sign for smart cards in our view.
Interest rate hikes hurt Internet stocks in the short term because it changes the risk-reward equation for short term profits. Looking at the long term view, interest rate hikes will be beneficial if they achieve the goal of staving off inflation.
Researching RevenueWhere can I find up-to-date revenue information for Internet companies?
Reply: If its a public company, you can read the quarterly reports which must be filed with the U.S. SEC (Securities and Exchange Commission). These reports, known as Form 10-Q, report detailed information on sales, as well as expenses. For a look at an entire year, you'll want to read the 10-K which is the annual statement.
The SEC makes the documents available to the public at its Web site, www.sec.gov in what's known as the EDGAR database (Electronic Data Gathering, Analysis, and Retrieval system). Most financial Web sites provide copies of these documents or links to the filings at the Edgar Web site.
Our recommendation for finding the reports is Wall Street Research Net, the newest Web site in the internet.com network (like the famous electric razor tycoon, we liked it so much we bought the company). To begin your search at WSRN, enter the ticker symbol of the company you want to research from the home page. The page that displays will have a link to the SEC filings right at the top of the results page, along with links to dozens of other reports and charts on the stock.
A number of financial publishers report revenues in formats that are far easier to read than the formal SEC reports. On the Wall Street Research Net results page, you'll find links to several of these sites. For example, compare the Zacks Annual Income Statement for Amzaon with the SEC document and you'll see a refreshing difference.
More valuable for most investors are the analysts' estimates for future earnings, which you'll find on the WSRN results page under Earnings Estimates. For a sample, see the Zacks Earnings Estimates for Amazon.
Look for Internet Stock Report to provide more financial information, integrated into the stock report articles using this new site. We're hard at work on some major enhancements to ISR that should make it easier for you to perform research and make investment decisions.
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