Investors Bidding High for Internet Auction Stocks
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In the volatile world of Internet stocks, one of the fastest-rising sectors of late are the auction sites. Investors, excited by the prospect of future earnings, have prompted an incredible run-up of the leading contenders since the fall.
Many analysts have positive outlooks for the stocks, particularly eBay since it collects fees from people who sell goods on its service.
eBay has traded from 25-1/4 to more than 311 over the past year. The company's stock has taken off dramatically since mid-November when it crossed the 100 mark. Onsale has been through a rougher ride, ranging from 10-5/8 to 108 over the past year. It's currently trading at just under 70, having been helped by a recent announcement that will provide auction content to Yahoo!
However, Keith Benjamin, technology analyst at BancBoston Robertson Stephens, isn't too positive about Onsale over the long term, saying "even turkeys can't fly for long."
Analysts attribute much of the rise to Onsale's announcement with Yahoo!, saying investors tend to reward similar stocks.
Despite the wild valuations of Internet auction plays, analysts are positive on the sector as a whole. However, eBay tends to overshadow its competitors.
Benjamin is particularly bullish on eBay, saying it stands to become a franchise player. That is one of the reasons he is maintaining his "buy" rating on the stock.
Another reason Benjamin holds high hopes for eBay is the strength of its brand. That's particularly important in the Internet sector, since many companies are forced to spend huge sums of money on marketing to build brand recognition.
Benjamin said eBay spends $12.31 to acquire a customer and Onsale $33.23. In comparison, online book giant Amazon.com, spends $43.34 to acquire new customers, CDNow, $173.77; Preview Travel, $241.80 and E*Trade a whopping $403.04.
As of November, the latest period for which figures were available, eBay had 1.3 million users compared to 800,000 for Onsale. No figures were available for Ubid. While those numbers are significant, they pale in comparison to Yahoo!'s 25 million users, Lycos' 15.9 million, Excite's 13 million users and even the 5.6 million users of Preview Travel.
However, Benjamin believes there are plenty of new customers waiting to come online. He projects that the number of Web users will climb from about 65 million currently to 109 million by the end of 1999 and 158 million by the end of 2001.