Preview Stock - Stock Picks for the Value Investor
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Preview Stock - Stock Picks for the Value Investor






 

 

 

CMGI (CMGI)

6/08/05 - This internet bubble darling is a stock that *surprisingly* you should keep an eye on. The company has gone through numerous incarnations during its recent history. Most recently, it acted like a publicly traded venture capital company with numerous investments in pre-IPO internet companies. The company was initially successful. Multiple IPOs came public, including:

* GeoCities (GCTY) - Bought out by Yahoo
* Lycos (TRLY) - Bought out by Terra of Spain.
* Critical Path (CPTH)
* Silknet Software (SILK now KANA)
* Chemdex (CMDX now NXPS)
* Vicinity (VCNT)



But that plan went bust with the internet bust of the early 2000s. So then the company was forced to reinvent itself...and surprisingly it was profitable even on an operating basis 2 quarters ago. This is in big part due to the acquistion of Modus Media, a supply chain management and technology management services business, in August 2004.

CMGI had a net revenue increase of 151% to $265.7 million (yes that's revenue of $1 billion + a year). CMGI had net income of $19.6 million, or 4 cents per share, in the 3 months ended April 30, down from $69.4 million, or 17 cents per share, in the same year ago period. This was due primarily to a smaller income tax benefit of $24.7 million, compared with a benefit of $76.4 million last year. Operating loss improved to $1.9 million from $6.5 million in the same year ago period. Gross margins for the quarter improved from 5% to 10%, year over year. Revenues were higher in the 2nd quarter vs the 3rd quarter due to seasonal variations of sales, which was as the company expected.

As of April 30, 2005, CMGI had consolidated cash, cash equivalents and marketable securities of $187.1 million.

Why would we say this is a stock to watch? For one, analysts are not covering this stock. Two, most people associate the company with the era of internet excesses, and not so many realize that the company is actually growing sales and income, rather than counting on its investments. Of course, CMGI still has it's @Ventures arm, where it could profit from an eventual IPO. Interestingly enough, its investments recently have drifted toward clean energy companies in the pre-IPO stage, such as Advent Solar.

With the 14% drop in stock price to under $2 after earnings release (the income decline was a bit disappointing), CMGI bears watching, as a potential long term stock pick. It is one company that I would be interested in purchasing. Although there is one caveat...even at $1.95, the stock has a market valuation of $940.57M...but at least now it has the earnings and revenue to back up its market cap and stock price.

 


 

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The Financial Ad Trader