FYI...'Tech Stocks Stand Corrected'
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Dawn Patrol
August 05, 1999
by Loren Fox
There are two likely consequences of Wednesday's 1.9-percent drop in the technology-heavy Nasdaq index. First, investor sentiment will contiue to darken as everyone talks about the "correction." A correction is defined as a drop of 10 percent or more in a stock or index, and the Nasdaq index is now down roughly 11 percent from its high. Second, market players will be looking for a rebound in the medium term, now that technology stocks have come down in price.
However, Thursday will likely be a slow day, as traders wait for Friday's July unemployment report. The report will help sway thinking on interest rates, the subject of current worries. Thursday morning's economic focus will be the 10:00 a.m. EDT report of second-quarter productivity; economists estimate a rise of 1.8 percent.
Internet Upset: Late summer and early fall tend to be the worst time of year for tech stocks. And, apart from the occasional bounce, tech isn't likely to get much help from Internet stocks (which got roughed up again Wednesday). "The stocks have always been incredibly volatile," says Merrill Lynch analyst Henry Blodget. "[This downturn] is just a more severe pullback than we normally see."
Blodget tells UpsideToday that the usual summer slowdown in Net stocks is being exacerbated by both the fear of rising interest rates and a slowdown in the growth of new Web users. While he sees no reason to worry in the long term, he doesn't forsee any catalysts to drive the stocks higher in the near term. He remains cautious, however, noting, "There's lots of [potential] downside left in valuation."
Once school starts up again in September, Blodget expects Web traffic to spike higher. And by November, investors should be getting excited about the holiday shopping season and all the e-commerce business that will bring. Though he has little positive to say about August, he's more optimistic about the stocks' chances a month from now.
Company Happenings: After Tuesday's markets closed, online metasearch provider Go2Net (GNET) said it would buy Dogpile, another metasearch engine, for $40 million in stock and $15 million in cash.
Viasoft (VIAS), an information technology software and services provider, reported fiscal fourth-quarter earnings of 6 cents a share. That surpassed the 5 cents a share that was expected.
Internet search company GoTo.com (GOTO) reported a pro forma loss of 20 cents a share in its fiscal first quarter. Wall Street had been expecting a loss of 22 cents. Revenue rose to $3.6 million in the quarter from $19,000 a year earlier.
On The Horizon: On Thursday, SGI (SGI) holds an analyst meeting, where analysts expect the computer maker to inveil its new strategy. Look for earnings estimates to be raised.
Computer storage giant EMC Corp. (EMC) is also holding an analyst meeting Thursday.
Morgan Stanley Dean Witter hosts a conference on the Internet and financial services Thursday. Among the companies scheduled to present are E-Trade Group (EGRP) and Intuit (INTU).
IPO Patrol: Filled with hope, more Internet-related companies are going ahead with their initial public offerings despite the choppy IPO market. Thursday online real-estate services provider Homestore.com priced its IPO at $20 a share, at the top of the expected range. Shares should start trading Thursday under the symbol HOMS. Hopes are high because the offering is led by Morgan Stanley Dean Witter, which rivals Goldman Sachs as the top firm for underwriting Internet IPOs.
Also on tap for Thursday is Internet Capital Group (ICGE), an operator of e-commerce networks, which priced its IPO priced $12 a share; and Cobalt Group (CBLT), an online auto marketing firm, which priced its IPO at $11 a share.
Wednesday's hot IPO was Internet Initiative (IIJI), Japan's largest Internet service provider, in a deal led by Goldman. The American depositary receipts priced at $23 a share, and closed their first day at $31.51, for a gain of 37 percent.
Loren Fox is finance editor at Upside Media.>>
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I'm still holding a lot of my NETP shares...I can afford to be patient...This stock is really starting to demonstrate what the word OVERSOLD is all about...I refuse to sell at the very worst time -- didn't do that last fall with CMGI and was thankful.
Best Regards,
Scott
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