eMailbag Monday: Another Four Picks, Inktomi, ONSALE
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Before we open up the emailbag for Monday we couldn't wait to share this with those of you who may have missed it: Broadcast.com (NASDAQ:BCST) debuted on July 17 as the all-time best ever IPO, up 279% from its $18 initial price per share. That was a bump from its target of $13. Click here now and get our analysis of Broadcast.com's chances in this white-hot market.
And now let's take a few reader emails:
"I knew that 24/7 Media which provides Internet advertising and direct marketing services, and uBID which operates an Internet-based auction for excess merchandise will go public soon (already filed an initial registration statement). To what extent will 24/7 Media benefit from the Internet boom? Can uBID be the next Egghead? Any opinions about the potential growth for these companies.
By the way, you are always following the 10 picks of 1998 and you are not giving yourself credit for the 4 picks of Thursday, May 21 (click here to see the four): Egghead (NASDAQ:EGGS), E*TRADE (NASDAQ:EGRP), Mecklermedia (NASDAQ:MECK) and Amazon (NASDAQ:AMZN), up an average of 85.35% in just two months. Remarkable results."
Regarding 24/7 and uBID, the auction space appears to be getting crowded with eBay (just filed to go public), ONSALE (NASDAQ:ONSL), and Egghead's SurplusAuction. Wall Street's attention span wavers after about three or four similar stocks appear.
24/7 could find a slot behind DoubleClick (NASDAQ:DCLK). Look for our special IPO report tomorrow in Internet Stock Report.
Ink 2 You
"Give me your take on Inktomi and its Internet Cache product Traffic Server. I have been doing some reading and a few analysts believe that this market will approach $4 billion by 2002. Reports also say that by 2001 large ISPs will spend $1 to $2 Million on caching solutions as opposed to constantly buying faster lines and routers to solve network congestion. If INKT gained 30% market share, this would equate to $1.2 billion in sales at 10% and this could equal $120 million in net operating profit spread over 20 million shares, gives you potential EPS of $6.00."
Reply: Inktomi has what appears to be a strong position today as a recognized leader in traffic caching. The market for caching may exceed $7 billion in 2002 by our estimations. While we believe competition to be fierce, leaders may be able to leap tall buildings in a single bound. Market share? Perhaps 25%. Or Inktomi is acquired from now until then.
The server side and router brigade may try and get a bigger piece of caching as time goes on. Regarding shares outstanding, 20 million may be low if this splits numerous times, which in the span of four years we'd expect if INKT stays hot.
Blue Light Special
"I bought ONSL at $30 on May 21, but now it sits at about $22.50 per share. The financials appear to be very healthy. What is your opinion on this stock?"
Reply: In our view ONSALE (NASDAQ:ONSL) represents a better model for Internet commerce than pure retail. Its challenge, however, may be to broaden the sales lineup and shorten the bidding process. Another challenge is building brand to leverage into new auction-driven or sales areas as more and more auction services go public (eBay, uBID).
"What do you think of Cyberian Outpost? Could it be the next hot issue?"
Reply: Egghead's run could help Cyberian (cl ick here to see Cyberian pre-IPO analysis). But Digital River, a company that sells software via the Internet via downloads, is also screaming down the IPO pipeline. Downloads equals no CD jewel box, no plastic wrap, and better margins. In the Internet era those that have "digital" products and fulfillment (no real-world based packaging or distribution) are poised to fare better in the long term.