Feb 01, 2000
CMGI: Sell-Off Creates Buying Opportunity
Director of Research: Dave Sterman (2/1/00)
Shares of CMGI (NASDAQ:CMGI - news) have traded sharply lower in recent weeks,
falling 32% from their all-time high of
$163.50 reached on January 3 to a recent $111.19.
The sell-off is rather surprising, given that it has been “business as usual” at CMGI,
though many Internet stocks have seen rather aggressive selling this month
following their phenomenal gains in the fourth quarter of 1999.
In a previous update, we noted that CMGI was looking abroad for its next rounds of
investments. The company has been especially active in Asia, where its
international ventures arm has been quite busy.
On January 25, CMGI pushed further into Asia through a joint venture with Cyberworks,
which is widely considered to be the premier technology venture capital
firm in Asia.
The joint venture will manage and integrate CMGI’s 18 existing stakes in the region. In all,
CMGI has made 63 investments outside the U.S., and hopes to boost
that figure to 120 this year.
Prudential Securities analyst Paul Merenbloom also emphasized CMGI’s global
ambitions in a recent bullish report. He sees the company replicating its U.S. track
record on the foreign front. “CMGI’s kiretsu [sic] has developed critical mass and we
believe will prove highly portable to Europe, Latin America, and the Pacific
markets,” he wrote.
Merenbloom expects the shares to reach $200 within the year and $500 within two years.
The outlook for CMGI remains quite bright. And the recent sell-off should be seen by
investors as an attractive entry point.
Though the stock remains vulnerable should the broader markets weaken, the stock
offers plenty of upside based on our expectations of positive news flow and the
continual emergence of new catalysts. We enthusiastically reiterate our buy
Updated on January 31, 2000 with CMGI at $111.19.
Recommended on December 11, 1999 at $97.03.
(Magic 25 is a diversified portfolio of stocks that Individual Investor believes will
outperform the market over the course of the year. In 1999, the Magic
25 portfolio was up 79.3%. On average the portfolio has risen 31.6% annually.)