Keeping an Eye on MarketWatch Brian Graney (TMF Panic)
October 28, 1999
This morning, online financial news and information provider MarketWatch (Nasdaq: MKTW) gave investors something to stare at by reporting its third quarter results. Among the meaningful numbers, revenues came in at $7 million, up 45% sequentially. The net loss for the period (excluding expenses for pesky non-cash items, such as amortization of goodwill and intangibles) was $0.50 per share, which the company was quick to point out was not quite as bad as the $0.64 per share mean loss forecasted by analysts surveyed by First Call.
Among the less meaningful numbers, the company said it averaged 4.6 million monthly unique visitors (UV) to its websites during the quarter, based on data from online advertising firm DoubleClick. Then again, Web bean counter Media Metrix recently put MarketWatch's UV count at 2.5 million for September, so it's hard to figure out which set of numbers to believe. In any event, it's safe to say that MarketWatch is succeeding in carving out a name for itself in the realm of online financial information, even though president and CEO Larry Kramer's statement that the site is a "must-have" for online financial info addicts may be stretching things a bit.
In its first nine months as a publicly traded company, MarketWatch has had one heck of a bumpy ride. After skyrocketing to $130 per share on its first day of trading, the stock was taken to the cleaners this summer and bottomed out at $26 1/8 per share in early September. Since that date, the stock has more than doubled, with the main catalyst being a new three-year deal to be the primary financial news provider to America Online (NYSE: AOL).
More than anything else, investors can expect agreements and acquisition announcements to drive share price movements for the company in the future. Time-tested concepts such as increasing cash flow generation or extending the competitive advantage period may drive share price gains at some point down the road. But for the time being, MarketWatch's internal deal-making crew and its press release machine are the closest things the company has in its arsenal resembling real value drivers.
This is not to say out-of-hand that MarketWatch is destined to be a terrible investment, but it must be emphasized that the company's business structure and market opportunity are still being defined and virtually no one can predict how things will eventually shake out. What can be said for certain is that the company is blowing through cash right now, with cash and equivalents on the balance sheet falling by 24% during Q3 alone. Meanwhile, expenses are ramping up as the company looks to acquire more and more eyeballs with new products. Product development expenses nearly doubled sequentially as the company rolled out its CBS MarketWatch Weekend TV program, among other initiatives.
Factoring in the issue of risk is a major consideration in any investment decision, although the concept assumes more weight with an early stage company such as MarketWatch, which is trying to do business in the Wild West of online financial news. Priced at 45 times trailing 12-month sales, compared to 19 and 26 times trailing sales for Internet heavyweights Amazon.com (Nasdaq: AMZN) and AOL, respectively, a lot is currently expected out of MarketWatch. Given its price volatility track record, this is an investment that should only be considered by the most aggressive financial news junkies out there.
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