Analyst reports: Strong earnings stoke optimism for e-commerce

Littering their research notes with "outstanding" accolades and praising companies for giving them "greater confidence" in a variety of business models, analysts seemed especially stoked about Commerce One, eBay, Emulex and Epiphany.

"Across the board, Commerce One reported a very solid quarter, in our view, clearly establishing itself as a leading B2B name," wrote Eric Upin, business-to-business e-commerce analyst for Robertson Stephens. "The quarter was characterized by several key customer wins, real signs of traction with the SAP relationships, the close of the AppNet acquisition, and a deepening of its product and service offerings."

Pleasanton, Calif.-based Commerce One builds online marketplaces for a variety of industries, and it's one of the technology partners powering the automobile industry's massive Covisint exchange. The company makes money from fees based on sales within the marketplace and consulting work for its clients.

Commerce One reported third-quarter sales Thursday that increased 10-fold from the same period in 1999, smashing Wall Street expectations and boosting the stock more than 9 percent in after-hours trading. The stock traded Friday morning at $67.25, up a more modest $5.28 since Thursday's closing price.

Commerce One also reported that third-quarter revenue was $112.7 million, up from $10.4 million in the same quarter last year. Analysts polled by First Call/Thomson Financial were expecting roughly $85 million.

Commerce One chief executive officer Mark Hoffman also said Thursday that he expected the company to become profitable in the second-quarter, one quarter earlier than his previous prediction.

In response, several financial institutions emphasized their already bullish stances on Commerce One. Banc of America, US Bancorp Piper Jaffray and Wasserstein Perella each reiterated "strong buy" ratings.

First Union Securities upgraded the company from "buy" to "strong buy," while ABN Amro remained relatively cautious, reiterating its "buy" rating.

Analysts also applauded Epiphany, a San Mateo, Calif.-based company that makes software to gather and analyze customer data for corporate clients. Customers, including Hewlett-Packard, can use Epiphany software to spot trends in customer surveys and other sources such as telephone call centers, order-processing systems, Web sites and email.

Epiphany reported Thursday that third-quarter sales increased eightfold, helping the company post a narrower-than-expected loss. It also announced a 3-for-2 stock split, payable Nov. 13.

The company reported a third-quarter loss of $277.3 million, or $6.52 a share, compared with a loss of $6.8 million, or 91 cents, in the same period of 1999. Excluding charges, it lost $7.0 million, or 17 cents, compared with a loss of $6.0 million, or 34 cents, in the third quarter last year.

According to Epiphany's quarterly results, sales reached $39.1 million, compared with $5.3 million in the same quarter last year. Analysts were expecting roughly $33.7 million.

Shares jumped 22 percent on the news in after-hours trading on Thursday. They continued to surge Friday morning, trading at $87.63, or 35.33 percent higher than Thursday's regular closing price.

Credit Suisse First Boston and Prudential Volpe reiterated "strong buy" ratings, while First Union Securities reiterated a "buy" rating.

Banc of America Securities and US Bancorp Piper Jaffray upgraded Epiphany from "buy" to "strong buy." Robinson-Humphrey boosted it to "buy."

Robinson-Humphrey analyst William B. Chappell, Jr. dubbed Epiphany's third quarter "outstanding," raising his fourth-quarter revenue estimate to $46 million from $41.2 million. He raised his 2001 revenue estimate to $266 million from $243 million.

"The number of new customers was down from the 70 added in Q2, but the company focused on cross-selling opportunities during the traditionally slower summer quarter," Chappell wrote in a report released Friday.