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Internet Stocks
Jugroop Kullar
Nicole Taylor
Presentation OutlineExamples of Internet StocksTypes of Internet StocksHow Stocks are EvaluatedP/E Ratio
Tech WreckIPOsExamplesJuniper Networks, Amazon.com, Yahoo!
Lessons Learned
What are General Examples of Internet
Stocks?AMZN
EBAY
AOL
YHOO
JNPR
CSCO
ORCL
Types of Internet Stocks
E-commerce – consumer
E-commerce – business
Content
Connectivity
Software
Services
Source: “212 and Counting.” 18 August 1999. 11 November 2001 <http://fundpilot.net/stockbrief.htm>
Types of Internet Stocks
E-commerce – consumerCompanies that sell goods/services to
consumers over the Internet
Examples:Amazon.comEbay.comAutobytel.comE-trade.com
Source: “212 and Counting.” 18 August 1999. 11 November 2001 <http://fundpilot.net/stockbrief.htm>
Types of Internet Stocks
E-commerce – businessCompanies that sell goods/services to
businesses over the Internet
Examples:Stamps.comHotjobs.comAllscripts Inc.Claimsnet.com
Source: “212 and Counting.” 18 August 1999. 11 November 2001 <http://fundpilot.net/stockbrief.htm>
Types of Internet Stocks
ContentCompanies that provide information or
community services via the Internet to consumers and/or businesses
Examples:Yahoo!LycosHomestore.comAsk Jeeves Inc.
Source: “212 and Counting.” 18 August 1999. 11 November 2001 <http://fundpilot.net/stockbrief.htm>
Types of Internet Stocks
Connectivity Internet service providers (ISPs), Application
service providers (ASPs), hosting/co-location, backbone providers
Examples:AOLJuno OnlineDigex Inc.Earthlink
Source: “212 and Counting.” 18 August 1999. 11 November 2001 <http://fundpilot.net/stockbrief.htm>
Types of Internet Stocks
SoftwareCompanies that design and sell software for
use on the Internet, Intranets, or Extranets
Examples:AribaVerisignMacromedia IncBroadvision
Source: “212 and Counting.” 18 August 1999. 11 November 2001 <http://fundpilot.net/stockbrief.htm>
Types of Internet Stocks
ServicesCompanies that provide services to businesses
operating on the Internet, including consulting, advertising, and marketing
Examples:Network SolutionsModem MediaCobalt GroupDoubleclick
Source: “212 and Counting.” 18 August 1999. 11 November 2001 <http://fundpilot.net/stockbrief.htm>
How are Stocks Evaluated?
By Research
By Stock Market Indices
Stock Market
Index # of Stocks
Types of Stocks
Dow Jones Industrial Average
30 Large, growing companies. Chosen by editors of the Wall Street Journal
S & P 500 500 Largest, most widely held
ISDEX 50 50 Internet Stocks
Nasdaq Composite 5000+ All stocks traded on the Nasdaq Exchange
Russel 2000 2000 Smallest 2,000 of the largest 3,000 by market cap
Sources: www.biz.yahoo.com and Group 5 presentation on Internet Stocks from Winter 2001 Semester
How are Stocks Evaluated?
Company’s Financial Standings/Performance
P/E Ratio
P/E Ratio
P/E = price of stock stock earnings
(how much you’re willing to pay for a company’s earnings)
Source: Interview with Ben Worley, Investment Rep. From Edward Jones, Sept. 7, 2001.
What does it mean?
“The Idea behind P/E Ratio is that it is a prediction or more likely an expectation of the company’s performance in the future. A company with a P/E higher than the market or industry average means the market is expecting big things over the next few months or years. A company with a high P/E ratio will eventually have to live up to this high rating by either substantially increasing its earnings, or the stock price will need to drop.”
Source: www.investopedia.com “ Understanding the P/E Ratio”.
The Risk Factor and P/E
Beware! Even in stocks,
there are speed limits.
Pfizer drives at 30 – 40 MPH
Juniper Networks was speeding
at 400 MPH at the highest peak
Source: Interview with Ben Worley, Investment Rep. From Edward Jones, Sept. 7, 2001.
Tech Wreck
“When Good Stocks Go Bad”
These companies did not live up to the high expectations, so inevitably, the stock price had to fall…crash.
How Did it Happen?
“Sticker Shock”
People overpaid for these stocks and couldn’t get rid of them once they started losing value
Source: Interview with Ben Worley, Investment Rep. From Edward Jones, Sept. 7, 2001.
What is an IPO?
Initial public offering (IPO) — The first time a company sells stock to the public. An IPO is a type of a primary offering, which occurs whenever a company sells new stock, and differs from a secondary offering, which is the public sale of previously issued securities, usually held by insiders. Some people say IPO stands for "Immediate Profit Opportunities." More cynical observers say it stands for "It's Probably Overpriced."
http://moneycentral.hoovers.com/msn/basics/0,2980,6,00.html
IPOs Over Time
IPOs by the quarter from 1998 to present
0
20
40
60
80
100
120
140
160
Time Period
# o
f IP
Os
Source: http:.//moneycentral.hoovers.com/msn/ipo_performance/recent_ipos/0,2980,3_101,00.html
IPOs Over TimeIPO's by year from 1998 to 2001
0
100
200
300
400
500
1998 1999 2000 2001
Year
# o
f IP
O's
Source: http:.//moneycentral.hoovers.com/msn/ipo_performance/recent_ipos/0,2980,3_101,00.html
Dot Com Graveyard
August 2000 10
September 2000 22
October 2000 35
November 2000 46
December 2000 40
January 2001 44
Source: Battery, Jim. “Dot-Com Details: The Numbers Behind the Year’s E-Commerce Shake-out.”
InfoWorld. 26 March 2001.
Case Studies
Juniper Networks Inc
A provider on Internet infrastructure solutions that enable Internet service providers and other telecommunications service providers to meet the demands resulting from the rapid growth of the Internet
Source: “Standard & Poor’s Corporate Descriptions plus News.” The McGraw-Hill Companies.
Lexus-Nexis Academic. 8 November 2001.
Juniper Networks
Incorporated in 1996 in CA
IPO of common stock in June 1999 $34/share of 4.8 million sharesNet proceeds = $163 million
Has 927 Employees
Operates out of Sunnyville, CA
Offices in 30 countries around the world
Source: “Standard & Poor’s Corporate Descriptions plus News.” The McGraw-Hill Companies.
Lexis-Nexis Academic. 8 November 2001.
Juniper Networks
Scott Kriens Chairman, President, CEO 43
Pradeep Sindhu, PhD Vice Chairman, CTO 48
Marcel Gani CFO 48
Peter Wexler VP of Engineering 45
Name Title Age
Source: “Standard & Poor’s Corporate Descriptions plus News.” The McGraw-Hill Companies.
Lexis-Nexis Academic. 8 November 2001.
Juniper Networks
Main Product is:M Series Internet backbone routers
Customers include:Cable & WirelessQwest CommunicationsVerioMCI WorldCom
Top Competitors are: Nortell NetworksCisco SystemsAvici Systems
Source: “Standard & Poor’s Corporate Descriptions plus News.” The McGraw-Hill Companies.
Lexis-Nexis Academic. 8 November 2001.
Juniper’s Finances(in thousands)
1998 1999 2000
Revenues 3,807 102,606 673,501
Net Income
(30,971) (9,034) 147,916
Total
Assets
N/A 513,378 2,103,129
Source: “Standard & Poor’s Corporate Descriptions plus News.” The McGraw-Hill Companies.
Lexis-Nexis Academic. 8 November 2001.
Juniper’s Performance
Source: www.quicken.com
Case Studies
Amazon.com Inc
World’s leading online retailer. Company directly offers for sale millions of distinct items in categories such as books, music, DVDs, videos, toys electronics, software, video games and home improvement products.
Source: “Standard & Poor’s Corporate Descriptions plus News.” The McGraw-Hill Companies.
Lexis-Nexis Academic. 8 November 2001.
Amazon.com
Launched in 1995 by founder Jeff Bezos
IPO of common stock in May 1997 $18/share of 3 million sharesNet proceeds = $54 million
Has 9000 Employees
Operates out of Seattle WA
Source: “Standard & Poor’s Corporate Descriptions plus News.” The McGraw-Hill Companies.
Lexis-Nexis Academic. 8 November 2001.
Amazon.com
Jeffrey Bezos Chairman, President, CEO 37
Warren Jenson Sr. VP, CFO 44
Richard Dalzell Sr. VP, CIO 43
Diego Piacentini Sr. VP, General Mgr. Intl. 40
Name Title Age
Source: “Standard & Poor’s Corporate Descriptions plus News.” The McGraw-Hill Companies.
Lexis-Nexis Academic. 8 November 2001.
Amazon.com
Products and Services include: Books, music,DVDs, videos, consumer
electronics, toys, camera and photo items, software, computer and video games, tools and hardware, lawn and patio items, kitchen products and wireless products
Customers: 30 million WorldwideTop Competitors are:
Barnes & NobleCDnoweBaySource: “Standard & Poor’s Corporate Descriptions plus News.” The McGraw-Hill Companies.
Lexis-Nexis Academic. 8 November 2001.
Amazon’s Finances(in thousands)
1998 1999 2000
Revenues 609,819 1,639,839 2,761,983
Net Income
(124,546) (719,968) (1,411,273)
Total
Assets
N/A 2,465,850 2,135,169
Source: “Standard & Poor’s Corporate Descriptions plus News.” The McGraw-Hill Companies.
Lexis-Nexis Academic. 8 November 2001.
Amazon’s Performance
Source: www.quicken.com
Case Studies
Yahoo! Inc
Global internet communications, commerce and media company that offers a comprehensive branded network of services to more than 120 million users each month worldwide. WWW.YAHOO.COM was the first online navigational guide to the World Wide Web (WWW).
Source: “Standard & Poor’s Corporate Descriptions plus News.” The McGraw-Hill Companies.
Lexis-Nexis Academic. 8 November 2001.
Yahoo!
Incorporated in CA on Mar 5 1995 Again in Delaware May 18 1999
IPO of common stock in April 1996 $13/share of 2.6 million sharesNet proceeds = $33.8 million
Has 3259 Employees
Operates out of Santa Clara CA
Source: “Standard & Poor’s Corporate Descriptions plus News.” The McGraw-Hill Companies.
Lexis-Nexis Academic. 8 November 2001.
Yahoo!
Terry Semel Chairman, CEO 58
Jeffrey Mallett President, COO 36
Susan Decker CFO, Sr. VP of Fin & Admin 38
Farzad Nazem Sr. VP of Comm & Tech Serv, CTO 39
Name Title Age
Source: “Standard & Poor’s Corporate Descriptions plus News.” The McGraw-Hill Companies.
Lexis-Nexis Academic. 8 November 2001.
Yahoo!
Services include: Internet portal, search engine, directory for the
web, allows registered users personalized web pages, free email and calendars
Customers: 120 million users a month
Top Competitors are: America OnlineMicrosoftTerra Lycos
Source: “Standard & Poor’s Corporate Descriptions plus News.” The McGraw-Hill Companies.
Lexis-Nexis Academic. 8 November 2001.
Yahoo! Finances(in thousands)
1998 1999 2000
Revenues 245,132 591,786 1,110,178
Net Income
(13,641) 47,811 70,776
Total
Assets
N/A 1,520,129 2,269,576
Source: “Standard & Poor’s Corporate Descriptions plus News.” The McGraw-Hill Companies.
Lexis-Nexis Academic. 8 November 2001.
Yahoo’s Performance
Source: www.quicken.com.
Case Studies
Pfizer Inc
Anheuser Busch Companies Inc
Wal Mart Stores Inc
Citigroup Inc
Performance
Pfizer Anheuser Busch
Wal Mart Citigroup
Source: www.quicken.com
Lessons Learned
Good things can come from bad situations – the funding from investors allows us to move forward with technology.
If it looks to good to be true, it probably is!
Don’t put all your eggs in one basket!
The 5 PackEconomically Driven
R & D Driven Consumer Driven
Technology Driven
Consumer & Economic Driven
BAC PFE PEP MSFT WAG
C MRK KO CSCO WMT
JPM JNJ MCD SUN HD
WFC GRB BUD ORCL LOW
Source: Interview with Ben Worley, Investment Rep. From Edward Jones, Sept. 7, 2001.
The End!
Thank You
