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FOOL PLATE SPECIAL
An Investment Opinion
by Warren Gump
eBay Explodes Again
<% ' AvantGo:FoolPlate %>We Fools are sometimes a little too harsh on Wall Street analysts for being absurdly optimistic. Yesterday, analyst Jamie Kiggen of Donaldson, Lufkin, & Jenrette came out with a buy recommendation on eBay <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: EBAY)") else Response.Write("(Nasdaq: EBAY)") end if %>, the on-line auction firm, with a 6-12 month price target of $100, about twice Friday's close of $50 1/8. While aggressive, that recommendation may not have been aggressive enough. Perhaps a more correct price target would be $100 sometime this week. Yesterday, the stock surged $23 1/4 to $73 3/8. Today the stock jumped again, hitting $90 13/16 before falling back to its current price of only $84 5/16. Beyond the recommendation of DLJ, the stock is being propelled on expectations that the company might announce revenues and earnings above expectations after the close today.
Part of the reason for the dramatic price movements in eBay is the limited "float" (shares of stock available for trading). While eBay has approximately 40.2 million shares outstanding, only about 4 million of those shares are publicly traded -- the rest are owned by insiders and are not available for others to buy. Yesterday, trading volume was 6.8 million shares. Today, as of 11:45 a.m., volume is already 6.8 million shares. In other words, more shares have traded both yesterday and today than are in the float. That intense level of trading is common during a stock's first day of trading, but relatively rare at other times.
There are a lot of attractive investment features about eBay. It is working on a business model that is already profitable, unlike many other Internet startups. Revenue is soaring (Q3 revenue is expected to be up over six-fold to $10 million), the company has a large and rapidly growing community approaching (and now possibly exceeding) 1 million users that creates some barriers to entry, and the overall online marketplace is expected to explode. At the same time, the company is now being valued at $3.4 billion, although revenue likely will not exceed $50 million this year. That's a hefty multiple to pay, even for a company with eBay's dramatic growth.
One final thought for those who might think they have to jump on the eBay bandwagon before earnings are released. One common trading adage is to "buy on the rumor, sell on the news."<% ' AvantGo:End %>
<% ' AvantGo:Ups %>PC maker and direct seller Gateway <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GTW)") else Response.Write("(NYSE: GTW)") end if %> picked up another $1 13/16 to $57 9/16 after Derek Schneideman, president of Gateway Japan, was quoted as saying that the company expects PC unit sales in Japan to increase 35% to 50% next year. In addition, Gateway's global shipments soared 38% in the third quarter, placing the company among the top five PC makers for the first time.
PC makers continued rising following yesterday's news that worldwide PC shipments increased slightly more than expected in the third quarter. Dell Computer <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: DELL)") else Response.Write("(Nasdaq: DELL)") end if %>, which has the strongest growth among the top five PC makers, added another $2 3/8 to $64 7/8. IBM <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: IBM)") else Response.Write("(NYSE: IBM)") end if %> rose $2 7/8 to $145 15/16, Hewlett-Packard <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HWP)") else Response.Write("(NYSE: HWP)") end if %> gained $1 3/16 to $58 7/8, Compaq Computer <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CPQ)") else Response.Write("(NYSE: CPQ)") end if %> climbed $11/16 to $30 3/16, and Apple Computer <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AAPL)") else Response.Write("(Nasdaq: AAPL)") end if %> advanced $7/8 to $38 5/16.
Computer networking company Cisco Systems <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CSCO)") else Response.Write("(Nasdaq: CSCO)") end if %> tacked on $1 3/8 to $62 3/4 after announcing that Hitachi Data Systems will resell the Cisco 7000 Series of channel-attach, multiprotocol routers, making the product more "easily accessible" to businesses.
Saville Systems PLC <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SAVLY)") else Response.Write("(Nasdaq: SAVLY)") end if %>, which provides billing and customer care software for the telecommunications industry, surged $5 7/16, or 45.3%, to $17 7/16 after saying it expects "strong revenue growth in 1999." The company reported a 49% jump in Q3 revenue to $42.6 million and EPS of $0.21, up from $0.16 a year ago and in line with estimates.
Internet search engine and portal company Infoseek <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SEEK)") else Response.Write("(Nasdaq: SEEK)") end if %> powered up $3 7/16 to $31 15/16 on the coattails of eBay Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: EBAY)") else Response.Write("(Nasdaq: EBAY)") end if %> -- see the Fool Plate Special above -- and as Volpe Brown Whelan raised its rating on the company to "buy" from "neutral," citing Walt Disney Co.'s <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: DIS)") else Response.Write("(NYSE: DIS)") end if %> move to take a 43% stake in the company. Other Internet companies were up as well, with Excite <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: XCIT)") else Response.Write("(Nasdaq: XCIT)") end if %> rising $2 5/16 to $39 5/16, Yahoo! <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: YHOO)") else Response.Write("(Nasdaq: YHOO)") end if %> gaining $1 15/16 to $129 7/8, and Lycos <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: LCOS)") else Response.Write("(Nasdaq: LCOS)") end if %> adding $2 1/2 to $39 7/16. GeoCities <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: GCTY)") else Response.Write("(Nasdaq: GCTY)") end if %> also advanced $5 13/16 to $32 3/8, Amazon.com <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AMZN)") else Response.Write("(Nasdaq: AMZN)") end if %> rose $1 7/16 to $122 7/8, Onsale <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ONSL)") else Response.Write("(Nasdaq: ONSL)") end if %> was up $1 1/16 to $19 9/16, Mindspring Enterprises <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MSPG)") else Response.Write("(Nasdaq: MSPG)") end if %> climbed $1 1/2 to $41 1/2, and Think New Ideas <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: THNK)") else Response.Write("(Nasdaq: THNK)") end if %> rose $2 1/4 to $12 1/8.
Drug wholesaler McKesson Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MCK)") else Response.Write("(NYSE: MCK)") end if %> gained $2 1/16 to $73 7/8 after saying it expects fiscal second-half earnings growth of more than 30%. The company, which is planning a merger with healthcare software and services company HBO & Co. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: HBOC)") else Response.Write("(Nasdaq: HBOC)") end if %>, reported fiscal Q2 earnings of $0.52 a share, up from $0.41 last year and ahead of analysts' mean estimate of $0.50. HBO was up $21/32 to $24 11/32.
Chef Boyardee, Crunch 'n Munch, and other food products maker International Home Foods <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: IHF)") else Response.Write("(NYSE: IHF)") end if %> cooked up a gain of $2 13/16 to $17 after reporting Q3 EPS of $0.33 (before charges), in line with expectations, and announcing it has repurchased 4.4 million shares. The company also reportedly withdrew an SEC filing for a secondary offering.
Property/casualty insurance company TIG Holdings <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TIG)") else Response.Write("(NYSE: TIG)") end if %> jumped $1 3/8 to $14 3/8 after announcing that its board is "actively considering strategic alternatives with its investment banker, Goldman Sachs, including a sale, restructuring or recapitalization of the Company." The company reported a Q3 operating loss of $0.91 per basic common share, far short of analysts' mean estimate of a profit of $0.44 a share.
Earnings Movers
AFLAC Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AFL)") else Response.Write("(NYSE: AFL)") end if %> up $4 1/16 to $38 1/4; Q3 EPS: $0.39 vs. $0.35 last year; Estimate: $0.37
Airborne Freight Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ABF)") else Response.Write("(NYSE: ABF)") end if %> up $2 1/8 to $22 1/8; Q3 EPS: $0.65 vs. $0.94 last year; Estimate: $0.67
Altron Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ALRN)") else Response.Write("(Nasdaq: ALRN)") end if %> up $1 15/16 to $18 1/16; Q3 EPS: $0.17 vs. $0.22 last year; Estimate: $0.18
Cannondale Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: BIKE)") else Response.Write("(Nasdaq: BIKE)") end if %> up $3/4 to $11 1/4; fiscal Q1 EPS: $0.09 vs. $0.07 last year; Estimate: $0.08
Century Telephone Enterprises <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CTL)") else Response.Write("(NYSE: CTL)") end if %> up $3 1/16 to $51 3/4; Q3 EPS: $0.59 vs. $0.45 last year; Estimate: $0.54
CyberCash <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CYCH)") else Response.Write("(Nasdaq: CYCH)") end if %> up $1/4 to $8 1/2; Q3 EPS: $0.51 loss vs. $0.52 loss last year; Estimate: $0.65 loss
Friede Goldman International <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: FGII)") else Response.Write("(Nasdaq: FGII)") end if %> up $3/4 to $17; Q3 EPS: $0.37 vs. $0.23 last year; Estimate: $0.35
Hartford Financial Services Group <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HIG)") else Response.Write("(NYSE: HIG)") end if %> up $1 1/2 to $50 1/4; $0.87 (excluding capital gains and one-time items) vs. $0.76 last year; Estimate: $0.86
Hartford Life <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HLI)") else Response.Write("(NYSE: HLI)") end if %> up $4 5/8 to $47 9/16; Q3 EPS: $0.71 vs. $0.59 last year; Estimate: $0.69
International Network Services <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: INSS)") else Response.Write("(Nasdaq: INSS)") end if %> up $2 5/8 to $39 5/8; fiscal Q1 EPS: $0.17 vs. $0.09 last year; Estimate: $0.16
Micro Warehouse <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MWHS)") else Response.Write("(Nasdaq: MWHS)") end if %> up $1 7/16 to $21 7/8; Q3 EPS: $0.33 vs. $0.16 last year; Estimate: $0.26
Northern Telecom <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: NT)") else Response.Write("(NYSE: NT)") end if %> up $2 13/16 to $37 3/8; Q3 EPS: $0.42 (excluding charges) vs. $0.29 last year; Estimate: $0.37
PC Connection <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PCCC)") else Response.Write("(Nasdaq: PCCC)") end if %> up $1 7/8 to $15 1/2; Q3 EPS: $0.20 vs. $0.19 last year; Estimate: $0.19
Sanmina Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SANM)") else Response.Write("(Nasdaq: SANM)") end if %> up $3 5/8 to $41 1/2; fiscal Q4 EPS: $0.41 vs. $0.01 last year (excluding charge); Estimate: $0.39
SCI Systems <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SCI)") else Response.Write("(NYSE: SCI)") end if %> up $1 3/4 to $37 1/4; fiscal Q1 EPS: $0.45 vs. $0.53 last year; Estimate: $0.45
SDL Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SDLI)") else Response.Write("(Nasdaq: SDLI)") end if %> up $4 5/16 to $20 3/4; Q3 EPS: $0.21 vs. $0.17 last year; Estimate: $0.16
Sykes Enterprises <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SYKE)") else Response.Write("(Nasdaq: SYKE)") end if %> up $1 7/8 to $20; Q3 EPS: $0.21 (excluding charges) vs. $0.12 last year; Estimate: $0.21
Waters Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: WAT)") else Response.Write("(NYSE: WAT)") end if %> up $3 1/2 to $70; Q3 EPS: $0.67 vs. $0.42 last year; Estimate: $0.58
WMS Industries <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: WMS)") else Response.Write("(NYSE: WMS)") end if %> up $1/2 to $7 13/16; fiscal Q1 EPS: $0.06 loss (excluding discontinued operations) vs. $0.12 loss last year; Estimate: $0.07 loss
World Access <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: WAXS)") else Response.Write("(Nasdaq: WAXS)") end if %> up $2 3/16 to $20 1/2; Q3 EPS: $0.32 vs. $0.22 last year; Estimate: $0.30<% ' AvantGo:End %>
<% ' AvantGo:Downs %>Protective packaging maker Sealed Air Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SEE)") else Response.Write("(NYSE: SEE)") end if %> slipped $2 1/4 to $31 1/4 after revising downward its earnings expectations for fiscal 1998 and 1999 because of perceived economic weakness. Sealed Air expects full-year EPS of between $1.02 and $1.12 for 1998 and $1.42 to $1.69 for 1999, compared with analysts' estimates of $1.49 in 1998 and $1.88 in 1999. Meanwhile, the company reported Q3 EPS of $0.29 (before a $1.14 restructuring charge), down from $0.45 last year and $0.07 below Street projections.
Internet services company CNET <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CNWK)") else Response.Write("(Nasdaq: CNWK)") end if %> was down $2 to $42 1/4 after reporting Q3 EPS of $0.21 per share (before items), beating last year's $0.45 loss handily. Those "items" included a $5.3 million gain from the sale of shares of Internet software developer Vignette Corp. and more than $3.1 million in losses from its Snap! joint venture with NBC. Wall Street had projected a $0.12 loss for the company. Analysts interpreted the Q3 earnings as meaning anything from a loss of $0.16 to a profit of $0.13, according to reports. NationsBanc Montgomery Securities lowered its rating to "hold" from "buy."
High-end jewelry and gifts retailer Tiffany & Co. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TIF)") else Response.Write("(NYSE: TIF)") end if %> dulled this morning, falling $1 5/16 to $33 1/16 after Goldman Sachs downgraded the company to "market performer," taking the legendary company off its "recommended list." Goldman also downgraded another jeweler, Zale Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ZLC)") else Response.Write("(NYSE: ZLC)") end if %>, to "market outperform" from its "recommended list."
Vitamin and sports nutrition products retailer General Nutrition Companies <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: GNCI)") else Response.Write("(Nasdaq: GNCI)") end if %> was down $1 to $14 1/16 as Q3 same-store sales declined 1.6% for the U.S. stores owned by the company and EPS fell to $0.26 (before charges), which was a penny below market estimates and $0.04 below last year's figure.
Natural foods grocer Wild Oats Markets <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: OATS)") else Response.Write("(Nasdaq: OATS)") end if %> withered $3 5/8 to $25 7/8 after missing Wall Street's Q3 earnings target by a penny with EPS of $0.22, which was $0.05 better than last year's number. Piper Jaffray downgraded the company to "buy" from "strong buy" on the news.
Fiber-optic transmission and local area networking (LAN) products maker MRV Communications <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MRVC)") else Response.Write("(Nasdaq: MRVC)") end if %> was off $1 1/16 to $8 after Bear Stearns downgraded the company to "attractive" from "buy."
Cymer Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CYMI)") else Response.Write("(Nasdaq: CYMI)") end if %>, which makes excimer lasers for deep ultraviolet (DUV) photolithography systems, was cut $1 7/16 to $11 5/8 after warning that it expects slumping laser shipments to pull Q4 revenue down 16% to 20% for a net loss between $0.15 and $0.20 per share, well off the Street's estimate of a $0.02 share profit. Q3 EPS was $0.05, in line with market projections and a penny below last year's mark.
Financial services industry information technology provider BancTec Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BTC)") else Response.Write("(NYSE: BTC)") end if %> ticked down $15/16 to $13 1/16 after saying it expects to take a Q4 charge between $30 million and $35 million to reorganize into two separate businesses. Q3 EPS was $0.36, $0.02 off the market's consensus and down from $0.48 last year. On the bright side, the company also authorized a buyback of up to 1 million shares on the open market over the next 12 months.
British pharmaceuticals company Zeneca Group <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ZEN)") else Response.Write("(NYSE: ZEN)") end if %> was off $2 9/16 to $37 1/2 after it said full-year profits could be cut by as much as $218 million, more than the approximately $185 million the company predicted when it reported six-month results, if currency fluctuations continue.
Earnings Movers
Amkor Technology <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AMKR)") else Response.Write("(Nasdaq: AMKR)") end if %> down $1/8 to $4 7/8; pro forma Q3 EPS: $0.17 vs. $0.22 last year; Estimate: $0.17
Stratasys Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SSYS)") else Response.Write("(Nasdaq: SSYS)") end if %> down $1 1/4 to $5 7/8, Q3 EPS: $0.01 vs. $0.01 last year; Estimate: $0.07<% ' AvantGo:End %>
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Contributing Writers Yi-Hsin Chang (TMF Puck), a Fool Brian Graney (TMF Panic), Fool Two Alex Schay (TMF Nexus6), Fool, too Dale Wettlaufer (TMF Ralegh), Final Fool
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