Shopping.com Makes an Auspicious Debut

And perhaps more importantly, 2003 marked the company's first year of profitability under generally accepted accounting principles, with net income of $6.9 million, or 36 cents a share. For the first six months of 2004, which excludes the all-important holiday season, Shopping.com lost $6.6 million, or $1.17 a share.

"Internet stories are once again in vogue," Renaissance wrote in a note dubbing Shopping.com its featured IPO of the week. That's because nearly all of the dot-com IPOs have been profitable, while the ones that haven't are very close to it, the firm wrote.

"Shopping.com may not have the same media buzz of Google, but it is one that investors will definitely want to place in their IPO shopping cart, especially ahead of the busiest shopping season of the year," Renaissance concluded.

That said, there is at least one risk to investing in Shopping.com. A substantial chunk of the company's revenue -- 43% in the first six months of 2004 and 38% in 2003 -- came from Google, according to a regulatory filing with the Securities and Exchange Commission. The agreement with Google that was responsible for generating the majority of that revenue expires in April 2006, according to the filing.

Google operates its own competing search engine for finding and comparing products for sale, called Froogle, and could decide not to renew the contract or negotiate less favorable terms, Shopping.com acknowledged. "Google could decide in the future that it prefers not to do business with us due to the competitive nature of our services," Shopping.com wrote. In that case, "we could experience a significant decline in our revenues and the value of your investment could decline."

That fact prompted Renaissance to caution, "With the various agreements it has with Google expiring over the next few years, it begs the question of whether Google will choose to become a more direct competitor," Renaissance wrote.

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