Profiled 07-07-00 at $45
12 month target $112
July 2000: FreeMarkets, Inc. (FMKT)
Company Description: FreeMarkets is a leader in the online auction marketplace for directs goods procurement and is rapidly emerging as a full-service e-Marketplace for the global procurement of direct and indirect goods and asset recovery services. The Company serves the buy-side using a “downward bidding” auction format, facilitating cost savings for buyers ranging from 2% to 25%. Since 1995, the Company has conducted $5.4 billion worth of auctions for more than 65 clients in more than 100 supply verticals. More than 4,000 suppliers from 50 countries have participated in the FreeMarkets auctions. The Company’s success is based on an approach that emphasizes superior technology, a market-leading database of suppliers, in-depth supply market knowledge, and high-touch service to clients, creating both cost savings on transactions and improved processes to enable better buying decisions.
• FreeMarkets Is The Clear Leader In The Gargantuan Market For Online Mediated Procurement. With numerous years of experience, we believe FreeMarkets is very well positioned to capture a significant share of the multitrillion-dollar market for mediated online procurement. As newcomers are just getting started, FreeMarkets has delivered more than $5.4 billion in online auctions, creating more than $1 billion in direct savings.
• Premier Customer Base And Vast Experience Position Company Extremely Well For Rapid Growth. FreeMarket’s impressive list of 47 Fortune 1000 customers including Visteon, its largest customer to date, provides a great base for expansion with less than 5% penetration, a source of deep expertise with engagements in more than 100 vertical categories, and a strong reference base for expanding the model to the untapped government and global markets. Additionally, its customer relationships have also provided critical mass for new offerings as it is now expanding into surplus assets.
• Delivers Unique And Powerful Value Proposition Beyond Just Auctions. While much of the attention for B2B marketplaces is on lower prices, FreeMarkets also delivers cost savings by helping companies make better and faster buying decisions. The Company has defined the end game as true “decision-support” services by working extensively and directly with companies—before, during, and after the auction—to develop and standardize best practice processes. This value proposition will be a critical differentiator going forward.
• FreeMarkets Should Be A Core Holding For Any B2B e-Commerce Investor. We rate FMKT shares as a Strong Buy with a price target of $112 (based on fiscal 2004 EPS of $3.86, a 90 P/E, discounted back at 30%). With lockup expiration on June 7, downward pressures on FMKT shares have created bargain buying opportunities for investors.
