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Go2Net rallies on earnings, upgrade

Go2Net Inc. (Nasdaq: GNET) shares moved up 5 1/16, or 6 percent, to 97 1/16 Wednesday, one day after it shattered analysts' earnings estimates in its first quarter.

On Tuesday, Go2Net posted a profit of $7.3 million, or 16 cents a share, on sales of $14 million.

First Call consensus was expecting a profit of 7 cents a share in the quarter.

The $14 million in sales represents a 439 percent improvement compared to the year-ago quarter when it lost $21,600 on sales of $2.6 million.

On Wednesday, Piper Jaffray upgraded the stock from a "buy" recommendation to a "strong buy."

PaineWebber's Jim Preissler also raised his estimates for fiscal 2000 and 2001 after Go2Net doubled his estimate of 8 cents a share.

"While Go2Net beat our estimates in both advertising revenues and non-advertising, we believe the upside revenue surprise came primarily from the advertising component, which represented roughly 63 percent of total revenues for quarter, more than we had anticipated," Preissler said in a research note. "Going forward, we believe the broadband portal Go2Net could launch mid-2000 (calendar) and could contribute high CPMs and potential new, more mainstream advertisers because of more media-rich broadband advertising."

Preissler raised his fiscal 2000 sales estimate from $59 million to $69 million and boosted his fiscal 2001 estimate from $96 million to $117 million.

Go2Net has now posted four straight quarters of profit and its pro forma operating margin -- operating income as a percentage of revenue -- rose to 24.1 percent in the quarter from 17 percent in the fourth quarter.

"During the recently completed quarter, Go2Net continued to make significant progress, both operationally and strategically," said CEO Russell Horowitz in a prepared release. "Go2Net's strong financial results continue to reflect the substantial operating leverage inherent in our business model. We again experienced strong growth in our three categories of focus: consumer services, business services, and enabling services."

GoNet shares hit a 52-week high of 111 3/4 in December after bottoming out at 19 1/2 in February.

First Call consensus expects it to earn 34 cents a share in the fiscal year.

All six analysts following the stock rate it either a "buy" or "strong buy."