EarthLink up on membership news
The ISP reaches its membership goal several months earlier than analysts and its own internal figures had predicted, and sees its stock rise as a result.
Yesterday, EarthLink announced that it had reached 1 million subscribers as of the end of last year, several months ahead of what Wall Street and its own internal figures had predicted.
On the basis of that announcement, Everen Securities today upgraded its rating on the stock to "outperform," and raised the company's six-month price target from 62 to 79.
EarthLink shares closed up 3.187 to 65.625, a gain of more than 5 percent.
The Pasadena, California-based ISP originally had planned to hit the million-member mark in February or March of this year. But the company used several strategic partnerships in recent months to boost its growth rate beyond expectations, reaching the milestone by the last day of 1998.
The company signed a deal with Sprint last summer, in which the long distance telephone company took a minority ownership stake in the ISP, transferred its own Internet subscribers to EarthLink, and promised to feed another 150,000 subscribers per year into the service. EarthLink executives say Sprint has already exceeded its promises for the six months since that deal.
In recent months, the company has negotiated to include its software with iMacs as well as Packard Bell and NEC computers, and netted a spot as CompUSA's default provider for in-store promotions.
The combination of these promotions led to company's strongest fourth quarter ever, EarthLink executives said.
"[These arrangements] really helped put EarthLink's software in the hands of people ready to surf the open Internet for the first time," EarthLink chief executive Garry Betty in a statement.
The company expects to post fourth-quarter 1998 revenues of between $57 million and $58.7 million, executives said. That figure would be nearly 140 percent higher than 1997's fourth-quarter revenues of $24.5 million.
Last month the company filed to sell another 2.5 million shares of stock. Executives said the proceeds from this sale would be used to grow the company's subscriber base further, either through new marketing arrangements or acquisitions. The company said it would post a loss for the fourth quarter of 1998, however, and would likely continue to see net losses through the end of 1999.
But the bulk of the growth so far has not been through purchasing other ISPs, as has been the case for some competing national and regional service providers. "Most of what you've seen so far has been organic growth," said Kristin Kappos, the service's vice president of communications.
The company did gain nearly 130,000 subscribers in mid-1998 from Sprint's Internet service, however.
The news comes shortly after America Online announced that it had reached its own 15 million subscriber mark. While conceding the top spot to AOL, EarthLink has aggressively taken aim at the ISP market's No. 2 spot, adding a portal-style customizable home page for its members along with its marketing efforts.
But the company is likely to face steeper competition from AT&T and other telephone companies over the next year, as they have begun focusing more heavily on cross-marketing Internet and voice services. AT&T's WorldNet service still leads EarthLink with close to 1.3 million members.