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Gopher - Thanks for finding that one.
Here is the link for that.
http://www.ragingbull.com/articles/cyberstock/04-14-00.html

Is the honeymoon over?
Cyberstock Investor Report 04/14/2000 5:30 PM
By Matt Ragas

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(In coming weeks, Raging Bull will highlight top
installments from its Cyberstock Investor Report
column. Watch for new reports soon!)

Here comes the bride -- all dressed in red ink and a
declining stock price. That's the reality that
TheKnot.com's (KNOT) Chief Executive Officer,
David Liu, must face. So far, The Knot's relationship
with Wall Street has been rocky, and judging from
the market's reaction, it's going to take more than a
good divorce lawyer to get Liu out of his current
predicament.

Since going public in early December of 1999 at $10
a share, this online wedding resource Web site has
done nothing except head south. The Knot has
become part of the growing "dot-com graveyard" --
those splashy Net IPOs of yesteryear that have been
forgotten by analysts, fund managers, the media,
and nearly everyone else in between. Based on
Friday's closing price of 7 7/8, the company now
sports a deflated market cap of only $110 million, a
drop of $100 million from the company's first day
closing price. (Editor's note: TheKnot.com closed
Friday, April 14, at 4 7/8.) Clearly, investors are
thinking this shotgun wedding was a bad idea.

However, after digging into the underlying business
model of TheKnot.com and the market that the
company serves, I believe I may have found a
fledgling Net company worth a second look.
Consider for a second that the domestic wedding
market generates over $45 billion in retail sales each
year. Also keep in mind that traditional wedding
magazines command advertising rates on average
3.5 times higher than general interest women's
magazines. In addition, this one wedding site
happens to be backed by the likes of America
Online (AOL), shopping giant QVC, and established
venture firm Hummer Winblad. One would be hard
pressed to find a more distinguished group of
marquee investors.

To top it all off, based on The Knot's current valuation
of $110 million, and current cash position of nearly
$32 million after a recent acquisition is completed, I
am left staring at a market cap that is comprised of
almost 30% cash. Having a little downside support is
never a bad thing. I also find it interesting that The
Knot has been aggressively looking to establish its
brand and products beyond the Web. As frequent
readers of this report know, I remain extremely
intrigued with Net companies that are integrating
offline media into their core businesses. I decided it
was time to go to the "cyberstock chapel" and take
a closer look at The Knot.

Untying the fraying Knot

The Knot currently offers the standard fare one would
expect to find at any vertical destination site. It offers
a solid blend of content, community,
communications, and commerce features all
wrapped around wedding planning. The company
currently relies on a key relationship with AOL, its
initial outside investor, for providing a significant
amount of its total traffic and distribution. According
to SEC filings, AOL members were responsible for
roughly 40% of the company's total traffic in 1999.
The Knot also enjoys distribution deals with AOL
properties AOL.com, Netscape, and Compuserve.
While it is never encouraging to see a company
relying on one relationship for so much of its
business, AOL's 8% equity stake in The Knot
suggests that the company is on solid ground in the
foreseeable future.

The Knot made a variety of small acquisitions last
year to broaden its suite of services. In July of last
year, it acquired Bridalink.com, an online wedding
supply store, and Click Trips, a small online travel
agency. In August of last year, The Knot also
scooped up Wedding Photographers Network, a
searchable database of wedding photographers.
These moves are an attempt to enhance the
e-commerce side of the company's business, led by
The Knot Registry. The registry was launched in
November of 1998, and today features over 10,000
products from over 450 retail brands. As part of a
$15 million strategic investment made by QVC in
April of last year, The Knot began outsourcing
customer service and order fulfillment for The Knot
Registry to QVC.

Pushing the brand beyond the Web

While the AOL and QVC relationships strengthen
The Knot's online distribution and e-commerce
efforts, the company has also been aggressive in
building its brand offline. Through a three-year
agreement with Broadway Books, a division of
Random House, The Knot published a wedding
guide in January of last year that has sold over
40,000 copies. The company also released a
wedding gown guide last summer that is being sold
on its Web site, on QVC, and at bridal trade shows.
In addition, The Knot is the exclusive online sponsor
of the Great Bridal Expo, a traveling trade show
dedicated to the wedding market.

These partnerships all suggest to me that the
company's management team is filled with
forward-thinking individuals who understand that
Internet users don't exist in a vacuum -- they do
eventually venture offline and live their normal lives as
well. While the aforementioned offline media deals
probably won't translate into significant revenue for
The Knot's business, I believe the company's
acquisition of Weddingpages, Inc. for $8.5 million
in cash earlier this week was an incredibly savvy
move.

Weddingpages is currently the largest publisher of
regional wedding magazines in the U.S. This
acquisition takes The Knot a giant step beyond the
alliance it entered into with Weddingpages last
summer. Think about what the company gains. The
Knot will become the only online wedding site
positioned to attack localized wedding markets, with
a sales force in over 50 U.S. cities. In addition, The
Knot now gains crucial access to local vendors in
each of these markets, as well as the existing
reader base of Weddingpages, which can now be
weaned over to The Knot's Web site. When one
considers that over eight million couples have used
Weddingpages to plan their wedding, the acquisition
starts to look incredibly cheap.

Grappling for proper valuation

On Tuesday, The Knot reported fourth quarter
revenue of $2.5 million, a 1,065% increase over last
year's numbers, and a 31% sequential increase in
sales. Losses rose to $3.2 million for the quarter,
although metrics continue to grow nicely for The
Knot. Cumulative membership has now surpassed
500,000, a 290% increase over last year's total.
Monthly page views rose to 22 million a month,
compared to only 2.5 million a month during the
same period last year.

While these numbers are still quite small when
compared to the metrics of larger verticals, they
suggest to me that The Knot is heading down the
right aisle. Assigning a proper valuation to The Knot
is a little bit of a stretch, but the company's
annualized revenue run rate of $10 million suggests
that the company is currently trading at a price/sales
ratio of 11. For comparison (keeping in mind The
Knot is the only publicly traded wedding site),
vertical women's site Women.com, on its current
run rate, trades at a P/S ratio of roughly 12. Another
vertical destination, iTurf, which targets Generation
Y users, currently sports a P/S approaching 12 as
well. When compared to these other two, one can
argue that The Knot is already close to being fairly
valued. However, I believe the company's strong
cash position, dominant position in the wedding
vertical, and strong partnerships warrant a higher
premium.

If The Knot continues to execute, it will be hard for
analysts and investors to ignore this company for too
long. After all, one can snicker about a publicly
traded company geared towards the wedding
market, but the reality is that a $45 billion
opportunity is nothing to joke about. This is one
rocky marriage that I can see rebounding very soon.

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