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.”
Another high-flyer of late is Ubid,
which surged more than 50 on Tuesday and also posted huge gains on
Wednesday as investors started focusing on one of the relatively
undiscovered firms in the popular sector.
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.
