June 30, 2000

Online travel site rated a buy buy

Each week, the Daily Journal of Commerce compiles analysts' recommendations on Northwest stocks.

Stock prices reflect Thursday's close. The Dow slid 122 points to 10,376, while the Nasdaq dropped 127 points to 3,937. The S&P 500 closed down 27 at 1,452.

Analysts use the following guidelines for their recommendations:

• Strong buy, buy or highest
  
• Buy/accumulate, mild buy, outperform, attractive or above average
  
• Neutral, hold, reasonably priced, average or market performer
  
• Mild sell, unattractive, below average or underperform
  
• Sell, lowest

52-week high: $65 7/8
52-week low: $13

Buy. Like many Internet IPOs in 1999 Expedia.com burst out of the gate, only to fall hard in this April's shake-out. But Pacific Crest's Steve Weinstein said recent investments in the online travel site show confidence in its business model.

On Thursday, Expedia gained more than 10 percent on news that Priceline.com -- another online airline discount site -- will have to compete with newcomer Hotwire.com. Six airlines announced Thursday they have invested in Hotwire, which sent Priceline shares down 8.5 percent. Weinstein said he had not analyzed the Hotwire model, but maintained his "buy" rating on Expedia.

Expedia on Tuesday got a boost from investments by Technology Crossover Ventures, a Silicon Valley venture capital firm, and Microsoft Corp. Under terms of the transaction, Expedia will issue about 3.6 million shares of common stock with an exercise price of $16.60 in exchange for an investment of $60 million. After completion of the financing, TCV and Microsoft will own approximately 7 percent and 70 percent, respectively, of Expedia's common shares outstanding.

"In our view, an investment from such high profile investors should eliminate investor concerns over the viability of Expedia," said Weinstein.

Expedia also announced Wednesday that it had struck an alliance with Away.com, the leading adventure travel services provider on the Web. Away.com will become the exclusive content and services provider of adventure travel on Expedia, and Expedia will become the exclusive online air travel booking engine on Away.com.

"We believe that travel and destination service is one of the best e-commerce opportunities on the Web and that Expedia, as a clear leader in the space, is well positioned to capitalize on its growth."

52-week high: $47 3/16
52-week low: $25

Buy. Trading near its 52-week low, Boise Cascade is attractive following a recent slump in share price, according to Salomon Smith Barney's Roger Tilton.

Earlier this month, Boise pre-announced disappointing second-quarter results based on weakness in its office products and building products businesses. The stock sold off sharply due to softness in its uncoated free sheet sales seen in May.

"While building products results are expected to continue to struggle, we see office products bouncing back in the third quarter," said Tilton. "Combined with the improvement being seen in uncoated free sheet, Boise's earnings should jump sequentially in the 3Q and continue to improve beyond."

Tilton sees pricing and backlog improvement in the uncoated free sheet market, and notes that Boise has the "most leverage" in this market. "We are raising our rating on Boise based on the stock's low valuation and the bounce-back being seen in recent weeks in its largest product line, uncoated free sheet."

52-week high: $96
52-week low: $27 17/32

Buy. RealNetworks on Thursday announced the launch of Real.com Music Delivery -- a service that offers artists, music publishers and music retailers a new means to introduce and distribute their music to the more than 35 million registered users of RealJukebox. Real.com enables consumers to select from seven music genres. Each week, up to eight new CD-quality songs matching consumers' music preferences will be automatically delivered and added to their RealJukebox music collection.

RealNetworks also recently announced that Nokia will embed the RealPlayer in its EPOC wireless data platforms, and several European broadband providers will use RealNetworks' technology to deliver VHS quality streaming video. "This adds validity to our investment thesis that RealNetworks' streaming media will ultimately be widely deployed in applications well beyond the personal computer," said Dain Rauscher's Peter Leppik.

"We continue to believe RealNetworks is a compelling long-term growth story, given the company's dominant position in the streaming media market, and potentially substantial growth of that market as a greater share of all media types are delivered over IP-based technology," said Leppik. He sets a 12-month price target of $100.

52-week high: $30 3/8
52-week low: $14 1/2

Strong buy. After a 34 percent lift in the wake of strong earnings last week, Coldwater Creek has maintained its post-earnings momentum this week.

Coldwater announced first-quarter results of 34 cents a share versus 15 cents a share last year, and well ahead of the US Bancorp/Piper Jaffray estimate of 20 cents. US Bancorp lifted its fiscal 2001 EPS estimate from $1.53 to $1.70 on signs of strong expense leverage and increased catalog productivity. Internet sales increased to $13.2 million for the first quarter, representing more than 15 percent of total sales.

"We are very encouraged by the strides Coldwater Creek has made during the last year in positioning itself as a leading multi-channel retailer," said Jeffrey Klinefelter. "We are especially encouraged by the continued success of the company's e-commerce initiative, as it reveals a substantial opportunity for further sales growth. The company believes that 50 percent of its online purchasers are new, non-catalog customers. In addition, the Web site continues to be an extremely useful tool in clearing excess inventory."

"The company is expected to continue to expand its retail channel, and we believe the retail presence will increase consumer awareness and strengthen the company's brand quality," he said.

52-week high: $111 3/4
52-week low: $35 3/4

Strong buy. Go2Net on Thursday announced a deal with Talkway Communications to add video e-mail service to Talkway's communications services. Jeffrey Goverman of Pacific Crest said Go2Net is on its way to becoming a broadband infrastructure provider.

"Go2Net has a proven business model -- with multiple revenue streams, rising margins, a strong balance sheet and is cash flow positive," he said. "GNET is the second most profitable company in the Internet sector in terms of margin structure. We are obviously getting comfortable with the model, as it raised its target operating profit from 30 percent to a range of 33 percent to 38 percent last quarter."

52-week high: $60 1/2
52-week low: $25 15/16

Market perform. Laura Richardson of Pacific Crest on Thursday downgraded Costco from a "strong buy" to "market perform."

Richardson noted that Costco has a strong retail franchise and management, but comparable sales are moderating and expenses are mounting. The company faces difficult sales and earnings comparisons through March 2001, especially combined with a slowing consumer economy.

"Some expenses to support accelerated growth should be beneficial in fiscal year 2002 and beyond, but will hurt earnings per share and cash flow at least in the next 12 months," she said. "Costco faces an uphill climb, given the dramatic turnover of shareholder base and negative environment for retail stocks as interest rate increases impact consumer spending."

Previous columns:

• Primus leads in its e-business field, 06-23-2000
• Tektronix moves into high growth markets, 06-16-2000
• Nike maintains a strong foothold, 06-09-2000
• Esterline lifted by aerospace biz, 06-02-2000
• RealNetworks builds on market leadership, 05-26-2000
• DJC Northwest Stock Watch, 05-19-2000
• Northwest Stock Report, 05-12-2000
• Northwest Stock Watch, 05-05-2000