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B2B E-commerce Sector

Stocks followed:

company ticker symbol
Ariba ARBA
Clarus CLRS

Commerce One

CMRC

FreeMarkets

FMKT

Internet Capital Group

ICGE

I2

ITWO

Manugistics

MANU

Purchase Pro

PPRO
Safeguard Scientifics SFE
Sciquest SQST
VerticalNet VERT

updated 11/20/00

Sector Rating

6 month outlook: 4/10
1 year outlook: 5/10

It seems our 5/10 rating 6 month outlook on the B2B sector was still too optimistic. But we were right on one major part: Ariba was way overvalued with a market cap of between $34-40 billion. Today, less than 2 months later, Ariba is only $20 from its record low with a market cap of $16.2 billion (which we still believe to be excessive).

None of the B2B companies have been immune to the sector slaughter. Commerce One and Purchase Pro have also been hit very hard with declines of over 50%. Clarus is down into the single digits, on company specific problems, as it misguided several analysts and did not pre-warn on its earnings which came in much worse than expected. The only saving grace for Clarus today is that it is worth a bit more than $15 based purely on its cash holdings (it closed at $9 today). However, we would no longer be buyers of this company based on its B2B business. B2B incubator, Internet Capital Group has plummeted to $6, as investors wonder how many other companies it will be able to bring to public. Safeguard Scientifics has taken a proportional hit as well, although we consider Safeguard to be a better investment than Internet Capital Group.

We aren't too optimisitic about B2B companies at this point in time, and wouldn't encourage investors to bottom fish on these stocks just yet (although at $6, ICGE looks quite tempting). A turnaround in the stock market won't be of much boost to this sector, as these companies still need to prove to investors that they can maintain/lower costs and reach profitability. As such we are lowering our 6 month outlook from 5/10 to 4/10 and our 12 month outlook from 6/10 to 5/10.

 

 


 

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The Financial Ad Trader