Autobytel ABTL
August 23, 2000 - 10:22am EST by
alex15
2000 2001
Price: 5.50 EPS -1.52
Shares Out. (in M): 20 P/E
Market Cap (in $M): 0 P/FCF
Net Debt (in $M): 0 EBIT 0 0
TEV ($): 0 TEV/EBIT

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Description

ABTL: a little more Growth/Fundamental

Overview
========
One of the few new business model with real revenues addressing large inefficiencies in an existing industry structure (with a value proposition) for both (a) potential car buyers (consumers), (b) car dealers (businesses)

ABTL charges dealers (which it signs up to contracts) a monthly fee ($700 to $1500) for being referred ABTL customers. Real value to dealers in less in the gross margin impact (ABTL customers are price conscious shoppers) but in the significant reduction in marketing/promotion/personel expenditures per ABTL car sold for the dealer. At the operating margin level, dealers can gain significantly from the reduced SGA savings of ABTL sourced cars.

Main Points
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+ $100MM of free cash on the balance sheet at latest quarter
+ Accordingly trades at $5/share with $5/share in cash (i.e. trades at cash value). No debt/liabilities
+ The issue accordingly is whether the continuing cash spend to profitability is creating long term value
+ Attracted strategic funding rather than shorter term VC funding (less hot money)
+ Consitently growing base of signed-up dealers
+ High brand name recognition in consumers' mind (Top 15)
+ Strong strategic partners (some with equity investments in the company and vested interest) Lojack, Unisys, Itochu, GECapital, Inchcape UK, GM Saturn
+ Cashless (to ABTL) expansion internationally with strong partners
+ Consistently beat street estimates
+ Significant market backlash on B2C tech stocks which ABTL has been co-mingled with

Financials
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- Cash burn 4-5MM for the next two-three quarters (to break-even)

Documentation
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- Good reports include DB Alex Brown and Lehman (though a little rosy), and good overview on ON24 (http://biz.yahoo.com/oo/000728/32427.html)


Risks/Concerns
==============
- Obviously for anything fundamental, its current losses and path to profitability.
- ABTL continues to build brand name through B2C marketing spending (mostly banners though which do work for that category)
- Existing dealer model possibly outdated long-term (vs. Dell-type direct buying from auto manufacturers) which may cause disintermediation, but this is very very far away

Catalyst

Achieving profitability in 1Q01-2Q01, after 15-20MM further cash burn. Will have $75MM when it turns cash flow positive. The market may price this visibility on turning profitable 6months+ ahead of time.
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