With the exception of Google, it has been a tepid year so far for Net stocks, writes Bambi Francisco of MarketWatch. There's been little M&A activity, and even fewer IPOs. Vonage, of course, comes to
mind--but for all the wrong reasons. But if News Corp.'s MySpace were its own company, Francisco says, it would likely be "the hottest kind of stock--one that every sell-side analyst would gladly
hawk." Perhaps. MySpace may make $50 million a quarter in advertising revenue, but it is also kind of stuck in a rut. Most advertisers still don't know what to do with the world's largest social
network. They can't really advertise on users' personal pages, and since MySpace is 99 percent personal pages, there's a plethora of unsold inventory. Even so, Bear Sterns is betting that MySpace
figures out its advertising conundrum, more than doubling its revenue to $528 million by 2008. At a 30 percent margin (a rough estimate), that would net the company $158 million. If you gave MySpace a
similar multiple to Google--which trades at 20 times next year's cash flow--MySpace on its own would be worth $3 billion in '08, Francisco says. True, not every Internet stock trades at 20 times cash
flow--but the social network would still likely be worth more on its own than it is under News Corp., which trades at about 7 times cash flow. Nevertheless, there isn't a snowball's chance in hell
that News Corp. is even thinking about spinning off MySpace. Since News Corp. took it over last summer, MySpace's usage has grown by nearly 400 percent. The conglomerate's difficulties monetizing the
site notwithstanding, it was a move that singlehandedly made News Corp. a major Internet player. There's also no guarantee that MySpace would do as well as Francisco predicted if it were on its
own--for one thing, the company would likely find itself faced with even more lawsuits, and it would have to spend more time and money justifying a rosy future to skeptical Wall Street analysts.
Read the whole story at MarketWatch »