iTurf Wakes Up

It’s been almost invisible since going public last April, but keep an
eye on “Gen Y” Web network iTurf (TURF),
whose stock price doubled Monday after nearly six months of
bottom-feeding.

After closing at 13 3/4 last Friday, TURF soared to 20 5/8 on Monday, a
clean 50% gain. Like virtually every other Internet stock, however,
iTurf was down as of Tuesday afternoon, trading at 17 15/16.

Even that lower figure is no doubt welcome by iTurf investors. After an
impressive debut on April 9, when it closed at 57 7/16, TURF sank fast.
Since late May it has spent the vast majority of its time trading in the
$10 to $15 per share range, well below its $22 offer price and not much
above its low price of 9 7/16.

A number of factors could be behind iTurf’s sudden rejuvenation. First
and foremost, the word from insiders is that the company’s Q3 earnings,
scheduled to be reported on Nov. 30, will bring positive news. Adding to
the optimism was the quarterly report released last Thursday by iTurf
rival Alloy Online (ALOY)Alloy
Online, which more than doubled revenue in the quarter ended Sept. 30.

In addition, I’ve heard street rumors that bricks-and-mortar retailer
The Gap may be looking to purchase iTurf.

Given eventual plans by iTurf’s parent company, “Gen Y” direct marketer
dELiA*s, to spin off iTurf as a separate entity (an S-1 for the sale of
2 million shares was filed on Nov. 5), The Gap’s interest sounds
plausible on two counts: 1) Both companies are targeting the same 10- to
24-year-old demographic, and 2) The already low survival rate for
independent sites fighting for e-commerce dollars will fall even further
as large retailers with brand and marketing clout continue their
migration to the Net. Thus, there is pressure on companies like iTurf
to partner or perish.

Meanwhile, iTurf prepares to debut its flagship site, iTurf.com, which
is designed to be a gateway to other sites in the iTurf network, such as
gURL.com, OnTap.com, dELiAs.com, droog.com, discountdomain.com and
tsisoccer.com.

These sites offer community-related services to teens and college
students, but that’s just the eyeball draw. ITurf makes about 85% of its
revenue through e-commerce.

With $5.6 million through the first two quarters of the year, iTurf
could be on track for a $15 million year in sales. With a market cap of
$311 million at the 17 15/16 price, the company is trading around 21x
projected ’99 revenue.

It will be interesting to see whether next week’s earnings report can
prevent iTurf from returning to its hibernation.


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