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Juno bolstered by analyst coverage, high-speed service

Shares of Juno Online Services rise nearly 16 percent as Jeffries & Co. initiates coverage with a "buy" rating and the company launches broadband service.

Shares of Juno Online Services rose nearly 16 percent today as Jefferies & Co. initiated coverage on the stock and the company launched a high-speed service.

Analyst Fred Moran started coverage of Juno with a "buy" rating and set a 12-month price target of $40 for the New York-based provider of Internet access.

Also today, Juno announced that it is offering high-speed Net access in New York City and surrounding areas. The company expects to expand the service later this year.

Juno offers free and subscription-based online access, a dual strategy that allows the company to spread its risks, according to Moran.

"This model provides not only an opportunity for stronger-than-average revenue growth but also downside protection if one portion of the dual business model underperforms financially," he wrote in his report.

At the 1 p.m. PST close of regular trading, Juno rose $3.13 to $23 on volume of 2.5 million shares, compared with an average daily volume of 1.7 million shares during the past three months.

The stock spiked at $87 on Dec. 22 on volume of 21 million shares after the company announced it would launch a free service.

The next day, the stock dove to $46.19 after Juno said it would sell additional shares of stock. The stock has traded as low as $8.87 since the company went public last May at $13.

Moran estimates Juno will generate $129 million in revenue this year and lose $3.66 per share, compared with revenue of $52 million and a per-share loss of $1.74 last year.

He said the company will be profitable on an operating basis in 2001, but he did not include a forecast for when it will post a net profit.

This year's jump in per-share losses will stem from the cost of signing new customers, Moran said.

Juno spends $115 for each paying subscriber, compared with an industry average of about $200, he added.

Another strength of its business model is the company's ability to sign users for the free service who later become paying customers.

Juno has three levels of offerings. The free service provides Net access and email. For $9.95 a month, subscribers can upgrade to the JunoWeb service and receive priority Net access and free technical support.

The Juno Express service, which was unveiled today, costs $49.95 per month and offers high-speed DSL (digital subscriber line) access through Covad Communications.

Moran expects Juno to finish the year with 12.3 million customers, a gain of 50 percent, while the number of paying customers will reach 965,000, a gain of 75 percent.