Did you see this from a few days ago?
June 08, 1999 12:31
Rising rates a boon to 'Net stocks - BancBoston
By James Saft
LONDON, June 8 (Reuters) - U.S. Internet stocks face little danger from rising interest rates, and some cash-rich companies will actually benefit, a prominent analyst said on Tuesday.
"The weirdest thing is that given how much cash each of these companies have, the best thing for them is rising interest rates because it will inflate my earnings estimates," Keith Benjamin, BancBoston Robertson Stephens analyst told Reuters in an interview.
"I think that we are going to have a five percentage point (interest rate) move to get anybody to switch allocations," said Benjamin, in London to speak to investors.
Traditionally, higher interest rates are seen as bad for high growth sectors such as the Internet because they reduce the current value to investors of future streams of earnings.
The American Stock Exchange Internet index has fallen some 18 percent since April 27, during which time yields on 30-year Treasuries rose 0.40 percentage points to 5.97 percent.
The fall in some stocks has been far steeper, with Amazon.Com falling 42 percent to 120.
Benjamin said many Internet companies are highly cash generative and will see higher interest income as bond yields rise.
"American Online now has $2 billion in cash. Network Solutions Inc. have $200 million in cash and generates cash on a $30 million a quarter run rate," said Benjamin, one of the most visible Internet analysts.
He took issue with the assumption that a slowing economy might disproportionately slow Internet revenues. Internet companies "are targeting the consumer with something that is more convenient and cheaper so in a tougher economy it is more likely that you will buy something on the web."
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