Symbol (Nasdaq): VIGN
52-Week Range: $100.66-$8.33
Price on July 7: $46.125
Market Capitalization: approximately $9 billion

One of the highest-flying Internet companies to be caught in April’s Nasdaq plunge was Vignette, the Austin-based maker of software that helps businesses build and manage Web sites. The five-year-old company had gone public in February 1999, and shareholders watched the stock rocket 1,500 percent to $100 before being hammered to a low of $27 in late May. Vignette was the victim of both the indiscriminate sell-off of Internet stocks in April and of its $1.7 billion acquisition of e-commerce software maker OnDisplay, for which many investors thought it paid too dearly.

Since bottoming out, however, the stock has been steadily fighting its way back and is now a favorite among analysts who follow Internet software. In fact, all of the fifteen surveyed in June by Zacks Investment Research—which provides earnings estimates to institutional investors—had strong or moderate buy ratings on Vignette shares.

Why is Vignette suddenly such a compelling buy? Mainly because the company has the dominant product in a wide-open market with few competitors: a software platform for building businesses online known as the V-series. “It’s a clear leader in the e-business software space,” says William Chappell, an equity analyst with Robinson-Humphrey in Atlanta who has a six- to twelve-month target price on the stock of $100.

The company is also growing like a virus. Its first-quarter revenues of $55.2 million were up 505 percent from the previous year’s first quarter. More impressively, CEO Gregory A. Peters not only believes Vignette can hit $1 billion in sales in just two or three years—making it the fastest software company ever to do so—but he’s gotten analysts to believe it too. “If they run like they’ve been running, it’s doable,” says Ian Morton of Chase H&Q in San Francisco. Fred Bush of Tejas Securities in Austin expects Vignette to hit the billion-dollar mark within the next five years, noting that the company has been expanding its platform through acquisitions and partnerships. The so-called “content management” market—basically building and maintaining Web sites and customer linkages— is expected to grow from $1 billion this year to $2.5 billion in 2003.

What about profits? Analysts had expected Vignette to turn profitable by the fourth quarter of this year, but the cost of the OnDisplay acquisition is expected to delay profits until the third quarter of 2001. Though the apparently steep price Vignette paid for OnDisplay spooked investors in May—the deal valued OnDisplay at $69, well above the closing price of $53—analysts say it is unlikely Vignette overpaid. “Vignette didn’t necessarily overpay once you start looking at what [the acquisition] can add in 2001 and beyond,” says Chappell. Bush agrees: “Vignette had great foresight in snapping OnDisplay up,” he says.

With a booming market for its products, few peers in its market niche, and stock analysts singing its praises, there would seem to be nowhere for Vignette’s depressed shares to go but up.