Morning Report for Thursday, May 31, 2001

http://www.internetstockreport.com/column/article/0,1785,1661_775981,00.html



i2 Outperforms

By Paul Shread (mailto:pshread@internet.com)

May 31, 2001 - i2 Technologies has been holding up better than other
leading B2B stocks, and in this tough environment for technology and
Internet stocks, any sign of relative strength is worth investigating.

The reason for i2's outperformance appears to be a simple one: i2
(NASDAQ:ITWO) is expected to lose less money than other leading B2B stocks
this year, and is expected to earn more than them next year.

That's why the leading supply-chain management software firm is up 60% off
its lows, while the exchange and procurement companies once mentioned in
the same breath as i2 as the leaders of the B2B revolution, Commerce One
(NASDAQ:CMRC) and Ariba (NASDAQ:ARBA), are languishing in the single
digits, barely above their recent lows. Add a potent alliance with IBM
(NYSE:IBM) to the mix, and you have the makings of a survivor, if not a
winner.

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i2 is expected to lose 3 cents a share this year (down from earnings of 26
cents last year), and is expected to earn 26 cents a share next year.
Commerce One is expected to lose 27 cents a share this year (up from a
year-ago loss of 35 cents), and earn 7 cents a share next year. Ariba is
expected to lose 33 cents a share for the year ending in September, more
than double its fiscal 2000 loss, and to lose 3 cents a share for the year
ending September 2002.

That makes i2 by far the most profitable of the three companies,
justifying the highest stock price of the three, closing at 20.14
yesterday. Commerce One closed at 6.29, and Ariba at 5.63. Those projected
earnings give i2 and Commerce One steep price-to-earnings ratios of 77 and
90, respectively, based on 2002 estimates. But that's better than Ariba,
which is expected to have no earnings next year and thus has no PE ratio.

i2 appears to have the edge in earnings and valuation, and the technical
picture is also much better than Commerce One and Ariba. Not only has the
stock bounced nicely off its 52-week low of 12.56, but it is also forming
a nice rising channel (see chart below), as long as that lower trendline
at 19 or so holds. Ariba and Commerce One have established no such chart
momentum.

Market dominance, earnings that are holding up comparatively well, and a
good technical picture. In this market, that's a rare combination, and i2
appears to have them all.



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