VerticalNet (Nasdaq: VERT) burst out of the gates Wednesday, up 10 percent after analysts talked up the downtrodden stock, and predicted the company will beat estimates in its upcoming third quarter.
Shares were up 3.13 to 33.38 Wednesday, recovering a little of the 47 percent it has lost this month. The company announced September 14 it had reorganized its business into three separate units, including one focused on business-to-business software.
"VerticalNet is a significant buying opportunity at these levels," said Patrick Walravens of Lehman Brothers. Walravens reiterated a "buy" rating and said the quarter looks strong, as the company's NECX electronic components exchange is moving online and Joe Galli has taken over as CEO.
Third quarter results are expected beat the firm's projection of $64 million in revenue and a loss of 28 cents a share by as much as 5 to 10 cents, "given VerticalNet's potential revenue upside and Galli's focus on controlling expenses," Walravens said.
He said concerns rover the company's NECX business are overblown and the company should weather the eventual turn in the semiconductor cycle. And at only 7 times 2001 revenue, VerticalNet is significantly undervalued compared to its B2B peers, Walravens added. Commerce One (Nasdaq: CMRC) was up 4.88 to 80 and Ariba (Nasdaq: ARBA) was up 1.44 to 160.5 Wednesday. Merrill Lynch analyst Henry Blodget said the stock needs a catalyst: a quarter where the upside to advertising revenue and, especially, e-commerce revenue is particularly outstanding. Although he said that the third quarter will be solid, with at least 10 to 15 percent upside to the firm's estimated $61 million in revenue, it won't be this catalyst.
"Investors will need patience to let some of the company’s e-commerce strategies take hold," Blodget stated in the research note.
Blodget also said the firm's forecast for exchange revenue was modest, and the favorable demand environment in the electronic components market could drive additional upside. The report expressed concern that second quarter barter revenue was up, and though management indicated they expect it to come down over coming quarters. Blodget said he would "monitor this closely."
Robinson Humphrey downgraded the stock Wednesday from "buy" to "outperform," and analyst Chris Vroom at CS First Boston reiterated his "strong buy" rating on the stock.