Juno: From so-so IPO to takeover target

It sure didn't take a long time for Juno Online Services Inc. (Nasdaq: JWEB) to go from a so-so IPO to a coveted takeover target.

Shares of Juno jumped 3 7/8 to 16 1/16 and was among the most active stocks on the Nasdaq after PaineWebber analyst Jim Preissler weighed in on Juno as a takeover target. PaineWebber was an underwriter for Juno's so-so IPO in May. Juno's IPO stumbled with a host of other offerings that were "broken."

Juno, which is a free email provider and Internet service provider, has been surging in recent days as ISPs look ripe for takeovers. Gateway Inc. (NYSE: GTW) is reportedly in talks with Earthlink Inc. (Nasdaq: ELNK) and Mindspring Inc. (Nasdaq: MSPG) is pursuing possibilities with potential suitors.

Preissler was that catalyst for Juno's gains today.

In a research note, Preissler commented on Juno potentially combining with America Online Inc. (NYSE: AOL), Yahoo Inc. (Nasdaq: YHOO) and others.

"We believe such a deal could make sense for AOL," wrote Preissler. "The two companies are both essentially competing for the same group of new users, the mass market consumers that are coming online currently. Since offering its ISP service, Juno Web, Juno now has the ability to hold onto these users once they are indeed ready, instead of losing them to the likes of AOL. Therefore, AOL could offer a broader way to capture new users combined with Juno, in our opinion."

Preissler added that other Web portals such as Yahoo, Infoseek (Nasdaq: SEEK), and Snap.com could use Juno as a way to gain user loyalty. "Companies with good content could now add connectivity to their offerings and develop more of a bundled, AOL-type, model," said Preissler. "User loyalty has been elusive for Web portals, as switching from site to site is quite easy. Having an application that is resident on the desktop that serves as a repeat destination for the user, the success of which has been demonstrated by the stickiness and usage of applications such as AOL 4.0 and ICQ."

Preissler started coverage of Juno on Monday with a "buy" rating and has a $56 one-year price target.