Organogenesis, Lycos, Level One and barnesandnoble.com
A selection of some of the most intriguing tech stock ideas on the Web. The items presented do not represent the views of TheStreet.com; rather, the collection is offered as a service to our members who may be scanning the Web for stock-related information.
Organogenesis
George Stasen
(Aug. 24)
Artificial skin is more than a Star Trek fantasy. It's a component of an underserved worldwide chronic-skin-wound market estimated at more than $6 billion annually, according to biotech stock analyst George Stasen. The market, which includes such ailments as diabetic foot ulcers, venous stasis ulcers and bedsores, continues to grow with our aging population.
A good play on this market is
Organogenesis
(ORG) - Get Report
, says Stasen. The company has received clearance from the
Food and Drug Administration
to market an artificial skin product called
Apligraf
. This product treats venous stasis ulcers, which typically strike the inactive elderly just above the ankle, causing open leg wounds that are difficult to heal. The current 100-year-old treatment protocol calls for the use of compression bandages. "What better definition for an under-served market?" asks Stasen. Pharmaceutical giant
Novartis
AG
is Organogenesis' marketing and distribution partner for the product.
Stasen finds it ironic that Organogenesis shares have declined 50% to 13 since FDA approval. But he takes heart from findings in a recent study by
Frost & Sullivan
that says skin-substitute markets experienced an 85% revenue increase in 1997 and should continue to show explosive growth.
More information can be found at:
Lycos
Forbes.com
(Aug. 26)
Lycos
(LCOS)
is the fourth most-visited destination on the Web, yet it's overshadowed by its search-engine rivals
Yahoo!
(YHOO)
and
Excite
(XCIT)
. Lycos stock was up 50% this year to 60 before splitting 2-for-1 Tuesday, but by Web standards that's pitiful. Excite is up 150% and Yahoo is up 180%. But Lycos has made some smart acquisitions, says
Forbes.com
, and shows promising signs of breaking into the black.
Among Lycos' purchases have been online community host
Tripod
, E-commerce vendor
WiseWire
, software maker
GuestWorld
and Email and directory service
WhoWhere?
. In general, analysts say Lycos paid bargain prices. With the acquisitions, Lycos had an unduplicated reach of 31% of home users in July, up from 24.7% in June, according to
Media Metrix
.
Internet analyst Abhishek Gami of
William Blair
likes Lycos' acquisition strategy, telling
Forbes.com
that it will keep revenues growing. And, in fact, revenues were $56.1 million for the fiscal year ended July 31, up 152% from the previous year's revenues of $22.3 million. "And one day," Gami says, "Lycos will get that critical mass where they start making money."
More information can be found at:
www.forbes.com
Level One Communications
Michael Murphy
(Aug. 25)
Level One Communications
(LEVL) - Get Report
makes semiconductors for such communications industry clients as
Lucent
(LU)
,
3Com
(COMS)
and
Hewlett-Packard
(HWP)
. The company's financial performance has been "impeccable," according to Michael Murphy of
The California Technology Stock Letter
. Revenues grew 56.6% annually for five years through 1997 and were up 87% for the first half of this year. Yet the stock has been beaten down along with other chip stocks. It trades at 20, well below its 52-week high of 33 1/4.
Level One's core markets should grow from $5 billion in 1997 to $11 billion in 2001, says Murphy. The recent acquisition of
Acclaim Communications
extends its reach into multilayer switching and routing silicon technology, markets that should grow from $16 billion to $26 billion during the next four years. In addition, Murphy lauds Level One's close relationship to its customers. The company doesn't invest in a new design until it has a customer committed to buy it.
Murphy recommends buying Level One up to 24 and set a target at 32.
More information can be found at:
barnesandnoble.com
Haywood Kelly
(8/21)
Barnes & Noble
(BKS) - Get Report
announced that it may offer 20% of its online arm,
barnesandnoble.com
, to investors if market conditions permit. Not a bad idea, considering the astronomical valuation for the No. 1 online bookseller
Amazon.com
(AMZN) - Get Report
, which has seen its stock has soar 700% in the past year and its market cap balloon to $6 billion. For barnesandnoble.com, "a valuation even half as high wouldn't be too shabby," says Haywood Kelly of
Morningstar StockInvestor
.
But, he notes, Amazon.com has a big head start, and it shows in the second-quarter numbers for both companies. Amazon.com's sales were $116 million versus $12.5 million for barnesandnoble.com, and it lost only $17 million during the quarter versus $23 million for barnesandnoble.com. For both companies, the foreseeable future is one of massive spending to buy market share with no profits in sight. Meanwhile, Barnes & Noble, the parent, has lost money in three of the past five years.
While an IPO will raise money for the online business, Kelly reminds us that it also allows Barnes & Noble shareholders to "cash out." Indeed, they may be the biggest winners. "They'll have succeeded in dumping 20% of the online business into someone else's lap," he says.
More information can be found at:
www.morningstar.net
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