| BUSINESSWEEK ONLINE : APRIL 5, 1999 ISSUE | ||||||||
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| COVER STORY
Investors: Keep an Eye on CBS MarketWatch.com After a blazing IPO, CBS's finance Web site has settled down. But if its big plans work out... In the world of network television, CBS (CBS) may just now be shaking off its yesteryear image. But in cyberspace, its brand name is hot stuff, thanks in large part to its top billing on one of the premier financial Web sites, CBS MarketWatch.com. The site is the main product of MarketWatch.com, which was formed in 1997 as a joint venture between Data Broadcasting Corp. (DBCC) and CBS's broadcasting arm. As a play on the demand for online financial information and services, MarketWatch's January initial public offering was a blockbuster. Priced at $17 a share, the stock opened for trading on Jan. 15 at $90, hit a 52-week high of $130 that day, and then closed at 97 1/2. Its 474% gain on the first day makes it the top performing IPO so far in 1999, says Mark Basham, who covers new offerings for Standard & Poor's equity research group. Not surprisingly, the shares haven't remained at that lofty level. MarketWatch stumbled to as low as $56 on Feb. 17 and has since stayed in a range between the high 60s and low 70s. On Mar. 25 it gained 1 3/4 to close at 68 1/2. Part of the rise may be due to comments made by CBS CEO Mel Karmazin at an entertainment industry conference on Mar. 24. Along with promising that CBS would expand into new Internet businesses, he said the company is considering putting live programming on CBS.MarketWatch.com. DEALS COMING? Then on Mar. 25, the company named to its board Robert H. Lessin, chairman and CEO of online investment bank Wit Capital Corp., and Dan Mason, president of CBS's Infinity Radio Group. Adding top executives to the board improves the company's credibility with investors and analysts, says Joel Krasner, an analyst with First Albany Corp., who adds that he's impressed. Krasner expects MarketWatch to make several significant announcements in the next four to eight weeks, which could make the stock volatile. He thinks MarketWatch is shopping for acquisitions, possibly intended to beef up the site's content. Partnerships with E-commerce players could also boost revenues. Another revenue source: MarketWatch will be launching a new subscription service, Marketwatch Pro, in the second quarter. Part of the strategy is to migrate CBS MarketWatch.com regulars to the paid site once they realize how valuable real-time information can be, says President and CEO Larry Kramer. "We believe that it is a lot easier for us, having built a mass-market general interest site, to add on a pay tier and higher-end commentary and gravitate users toward that than it is to start one from scratch." But he adds that will be just a small group of users and that MarketWatch's core business is serving a mass market and collecting fees from advertisers. NEAR-TERM PRESSURE. While Krasner thinks MarketWatch should pursue new deals, he's not promising they'll boost the stock. He has a $100 price target on MarketWatch, but rates it accumulate, in part because he wants to see the deals materialize before he raises his rating. He has also held back his buy rating due to volatility. "As an Internet company, the stock could come under some near-term pressure for reasons totally unrelated to its business," he says. In general, Krasner says MarketWatch shares will rise and fall along with the Internet sector and the market. Like online brokerage stocks, "it will trade in line with people's perception of the investment outlook for stocks generally," he says. MarketWatch's valuation is right up there with that of other Internet stocks -- which is to say it looks a little out of whack. The company has a market cap of about $775 million, but in 1998 it lost $12.4 million, or $1.38 a share, on revenues of only $7 million. Analysts don't expect it to turn a profit for at least the next two years. But its growth is substantial. In its Feb. 10 quarterly report, the company said revenues for the fourth quarter increased 41% over the third quarter. What MarketWatch really offers is traffic. According to Web tracker Media Metrix, it had 1.64 million unique visitors in February. MarketWatch reported on Feb. 10 that in the fourth quarter it had 160 million page views, up 29% from the third quarter. In January, Media Metrix ranked it fourth among finance sites visited at work and seventh among sites visited from home. At work, the top three financial sites were Yahoo!'s finance area, Quicken, and AOL's Personal Finance channel. Finance sites, considered among the Web's most popular destinations, attracted 35.2% of all Web users in January -- more than the 33.2% of users drawn to travel and tourism sites. "No question," says Kramer, "everybody is going to be doing their banking, trading, and managing their finances in some form online." And that means competition, which is perhaps MarketWatch's biggest threat. Plenty of other sites offer much the same information and services, including CNN.fn, TheStreet.com (which has filed to go public), Briefing.com, and S&P Personal Wealth (which, like Business Week Online, is a unit of the McGraw-Hill Companies). Dozens of financial sites operated by print magazines and broadcasters seek to attract the same audience. "It's not clear to me which one is really going to become a leader," says S&P analyst Basham. MAJOR EDGE. Krasner believes CBS MarketWatch has an advantage in its continuously rotating, "real time" news stories, and its "value-added kind of commentary." And clearly, its deal with CBS is a major edge. Along with credibility and news content, "CBS gives MarketWatch one of the leading opportunities to gain exposure and users through different media, including television, radio, and outdoor advertising," he says. "There aren't many, if any, other sites that have the kind of broad exposure they can leverage off a name like CBS." Analysts increasingly believe that Web sites will need broadcast partnerships to drive traffic. "We are of the view that the nation's most popular Internet sites will be connected to the content of the major entertainment/media companies," Merrill Lynch media analyst Jessica Reif Cohen wrote in a Mar. 2 report. So what has MarketWatch done for investors since its off-the-charts IPO? Not much. But in the next few months, the company should provide plenty of news to mull over. If MarketWatch's new products and new deals give it the stuff to break away from the pack of financial Web sites, the stock could resume its ascent. By Amey Stone in New York _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP |
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