Net analysts remain upbeat
into earnings season
By R. Scott Raynovich
Redherring.com
July 7, 1999
The numbers, the numbers. Everybody loves the
numbers. As earnings season approaches, the market
is entering a phase in which investors get important
data about the companies in which they've invested.
Many of the Internet stocks got a
boost this morning when a handful
of analysts issued reports saying
that most of the well-known
Internet companies would either
meet or beat quarterly estimates,
which will begin to emerge
between now and the end of the
month. But the market seemed
somewhat apprehensive about
where to go with such information.
After gaining as much as 40 points in morning trading,
the Nasdaq Composite suffered from a late sell-off,
ending the day down a little over four points. And
many of the leading Internet stocks -- such as America
Online (NYSE: AOL), Amazon.com (Nasdaq:
AMZN), and Yahoo (Nasdaq: YHOO) -- lost much
of the gains from the morning, if not all of them.
America Online, one of the
strongest Internet stocks of the
day, was up $5.69, closing at
$120.94, a gain of 4.93 percent.
America Online was given a
positive review in the BancBoston
Robertson Stephens and
Raymond James research reports
issued today, in addition to
receiving favorable press in this
Sunday's New York Times.
Amazon.com closed at $126.88,
up $2.81, or 2.27 percent, and
Yahoo closed at $175.13, down
$3, after reaching a high of $189.25 in the late
afternoon.
Of these companies, Yahoo will give the first public
pronouncement of its quarterly results, which is
expected to come after the market closes Wednesday.
America Online is expected to report earnings on July
22 after the markets close, and Amazon.com will
report on July 21 after the markets close.
INTERNET BULLPEN
Despite a healthy run in Internet stocks over the past
several weeks -- which has become somewhat typical
preceding earnings announcements -- several key
Internet analysts remained upbeat in their predictions,
saying that earnings and revenue growth in the Internet
economy would continue to fuel the boom.
Keith Benjamin of BancBoston Robertson Stephens
and Phil Leigh of Raymond James released reports
showing favorable signs of progress in the Internet
sector. For example, Mr. Benjamin's report predicted
that portal leader Yahoo would beat consensus
estimates of 8 cents a share and Amazon.com would
either "meet or slightly exceed" the consensus estimates
of a loss of 51 cents per share. Robertson Stephens,
Mr. Benjamin's firm, makes a market in Amazon but
not in Yahoo. It maintained a strong buy rating on
Amazon and a buy on Yahoo.
Mr. Benjamin was even more sanguine about the rest
of the year. "We believe there will be even more room
to beat estimates in the September and December
quarters," Mr. Benjamin said of leading Internet stocks
in general. He attributed such optimism to continued
evidence of growth in online use and an acceleration of
Internet commerce.
America Online received accolades from both the
Robertson Stephens and Raymond James reports.
Both reports predict that America Online would beat
consensus estimates for the quarter, which are in the
11-cents-per-share range. Mr. Benjamin's report
suggested that while AOL's international growth has
slowed, the company could add another 750,000
subscribers domestically. Mr Leigh, of Raymond
James, also downplayed the ill effects of the European
free-ISP craze on AOL, maintaining a buy rating on
the stock. Neither firm makes a market in the stock.
In addition to enjoying gains itself, AOL boosted the
fortunes of Drkoop.com (Nasdaq: KOOP) by
announcing a marketing pact with the company.
Drkoop.com closed at $36.88, up $13.25 (56.08
percent) on the day.
CNET'S SIESTA
In one stock, at least, there seemed to be a missing
link between the analysts and the stock-buying public.
CNet (Nasdaq: CNET) lost 50 cents a share to close
at $49.31, continuing a decline following the
company's announcement that it would spend $100
million on an advertising campaign. CNet stock has
lost 15 percent of its value since last Wednesday. The
advertising expenditures are expected to negatively
affect earnings over the next few quarters.
Mr. Benjamin, keeping in step with the generally rosy
tone of his Internet report, stayed positive on CNet,
even though it was one of the few stocks that won't
meet expectations.
"We recently readjusted our model to reflect CNet's
launch of a new $100-million ad campaign, which we
believe will help extend its brand and increase its
market share over the long-term; however [it] may stall
the stock over the short-term," said Mr. Benjamin.
Robertson Stephens does make a market in CNet. But
these days, it's hard to find any analysts who do not
issue research reports on Internet stocks in which they
make a market. But that's another story.
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