Internet Stocks for 2000, Part One

by Hal Plotkin

Silicon Valley Correspondent
Are there still good buying opportunities left in the Internet sector?

We asked several leading Internet analysts for their favorite Internet stocks for 2000. In Part one of this two-part series, we look at Puma Technology Inc., RealNetworks Inc. and Modem Media.Poppe Tyson Inc.

Puma Technology {PUMA}

John Todd, an analyst at C.E. Unterberg, says now is the time to buy Puma Technology. He recently set a 12-month price target of $200 for the stock.

Puma Technology 52-Week Stock-Performance Chart

“With the recent announced acquisition of NetMind, Puma Technology is now a complete wireless/mobile infrastructure systems provider,” Todd said in an e-mail interview. “The combination of Puma’s synchronization technology, ProxiNet’s data access and rendering, and NetMind’s mobile-wireless notification/mining/delivery/targeting/analytics is unmatched in the marketplace.

In our opinion, Puma Technology should now be perceived as a mobile/wireless version of and Vignette {VIGN}/Broadvision {BVSN}. In the same manner that Vignette and Broadvision provide e-marketing and commerce support to the desktop world, we believe NetMind, in conjunction with Puma will do likewise for the mobile world.

Since is valued at over $9 billion, Vignette at $7 billion and Broadvision at $8 billion, we believe we are being conservative to project Puma Technology to be worth at least $3 billion over a 12-month period.”

Todd also likes Optibase Ltd. {OBAS}, Polycom Inc. {PLCM}, Proxim Inc. {PROX}, SSE Telecom Inc. {SSET} and TCI Satellite Entertainment Inc. {TSATA}.

RealNetworks {RNWK}

Robert Martin, an analyst at Friedman Billings, Ramsey & Co., puts RealNetworks at the top of his buy list, setting a 12-month price target of $325 a share.

RealNetworks 52-Week Stock-Performance Chart

“We continue to believe the opportunity for RealNetworks to achieve even higher revenue goals is a likely reality,” Martin says. “The company has just barely started to “flip the switch” on the advertising opportunities. RealNetworks represents a core Internet franchise. Over 70 million people already use RealNetworks’ software. Eighty-five percent of audio- and video-content providers use RealNetworks’ server. We think the company has a pervasive position in audio and video content. RealNetworks has a premier desktop application that positions the company to garner a large audience as a next-generation Internet portal.”

Martin points to several recent RealNetworks announcements that, he says, demonstrate the company’s continued opportunities for growth. Those announcements include the rollout of the RealNetworks 7.0 server, which dynamically inserts ads within audio streams, a streaming media trial deal with Covad Communications Group Inc., and BMG Entertainment’s plan to offer 36 full-length albums during a 12-week promotion, which will use RealNetworks technology, among others.

“Streaming audio and video content on the Internet is 2 percent today of what it will be with broadband a few years from now,” Martin says.

The analyst also likes CNET Inc. {CNET}, Digital Insight Corp. {DGIN}, NetCreations, Inc. {NTCR}, S1 Corp. {SONE} and Inc. {SPLN}.

Modem Media.Poppe Tyson {MMPT}

Chris Hansen, an analyst at Banc of America Securities, places Modem Media Poppe.Tyson at the top of his list, setting a 12-month price target of $100 for the stock.

Modem Media.Poppe Tyson 52-Week Stock Performance Chart

“The addressable market opportunity for Modem’s services is enormous and growing rapidly,” Hansen wrote in a Dec. 8 research report. “Forrester Research estimates that the U.S. Internet professional services industry will grow from approximately $10 billion in 1999 to $65 billion in 2003 as the dramatic improvements in efficiency offered by the Internet lead to a continued stampede by start-ups, mid-size companies and Global 1000 corporations to transform their businesses to take better advantage of the Internet.

“While the vast majority of Modem’s competitors focus their efforts on project based engagements, Modem is clearly focused on establishing itself as the ongoing digital marketing solutions provider of record for Fortune 500 corporations. We believe Modem’s focus on securing large, ongoing client engagements significantly enhances its growth prospects. We believe Modem Media’s revenue growth will average in excess of 40 percent per year over the next three to five years.”

In part two of this story, we look at three Internet favorites of analysts Paul Weinstein of Credit Suisse First Boston, Richard Williams of Jefferies & Co. and Stephen Sigmond, of Dain Rauscher Wessels.

Internet Stocks for 2000, Part Two

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