Street gains confidence in Webcasting
NEW YORK — Internet video stocks like RealNetworks and PayForView.com rocketed to new heights Tuesday as Wall Street raised its bet on the ‘Net’s ability to reach mass audiences with movies, television and other content.
Jamie Kiggen, an Internet analyst at Donaldson, Lufkin & Jenrette, ignited the day’s buying spree by initiating his coverage of RealNetworks, the dominant provider of streaming media technology, with a buy recommendation — one backed with a 12-month per-share target of $250 on a stock then trading just above $150.
RealNetworks ended Tuesday up 27% at $195.44 a share, more than ten times higher than its trading range for most of last fall.
PayForView rode the ‘Net video rage as well, climbing 35% to close at $9.12 a share. The company has already positioned itself as “the largest Internet pay-for-view service in the U.S.,” even though that service won’t be available until this summer.
Analyst Kiggen said his RealNetworks recommendation was based on “a confluence of factors driving the use of streaming technologies,” including growth in the number of Web users and the time they spend online, an explosion in pages that incorporate streaming media and the eventual mass appeal of broadband access.
What’s more, Kiggen said he expects RealNetworks to achieve that rarest of conditions for an Internet company — profitability — in the fourth quarter.
” ‘RealNetworks’ branded software and services enable companies to deliver continuous ‘streams’ of audio and video to users’ PCs in real time, also known as Webcasting,” the analyst reported. “This process represents a dramatic improvement over the prior media delivery methods.”
Kiggen estimates that only 1% of Web sites currently use audio or video.
In one way or another, Internet video companies are in the business of digitizing traditional analog content and storing it at a “hosting” server, which end users can then access on their PCs.
The notion that significant numbers of people will eventually pull down content this way gained instant favor last week with Yahoo!’s agreement to buy Broadcast.com, which through a single Web site offers access to more than 425 radio and television stations and cable networks.
“We knew it was coming, but no one expected it to happen this fast,” said Abi Gami, a stock analyst with an Internet specialty at Chicago-based William Blair. According to Gami, the Yahoo!-Broadcast.com merger ensures the universality of a broadband technology that permits the convergence of Internet and broadcast content.
Not only is No. 1 portal America Online already committed to the technology, the analyst said, but now No. 2 Yahoo! is, too, to the tune of $6.1 billion — the amount of stock ear-marked for Broadcast.com.
“That’s when everyone who wants to participate in convergence woke up to the fact that RealNetworks isn’t one of 30 companies they can pick but one of a handful,” Gami said.
John Reed, prexy of Source Media, a provider of content formatted for both TVs and PCs, also cited Broadcast.com’s takeover as spurring category interest. To the degree that ‘Net video succeeds in sustaining the interest of “eyeballs,” he said, advertisers will lose interest in traditional media.