Thursday April 20 10:26 AM ET
Meeker Says Market Closer to Bottom for Net Leaders
NEW YORK (Reuters) - Morgan Stanley Dean Witter's closely-watched Internet analyst Mary Meeker said the market is closer to a bottom than a top for the leaders in the Internet sector.
In a research note written Wednesday, Meeker said there are some compelling Internet stock values. However, she added that she estimates more than half the companies in the sector will never truly recover and the sector, as a whole, perhaps has not yet seen a bottom.
Morgan Stanley's Internet Focus Stocks include: Yahoo Inc.(NasdaqNM:YHOO - news), Amazon.com Inc. (NasdaqNM:AMZN - news), eBay Inc. (NasdaqNM:EBAY - news) in the Internet portals and commerce sector. The firm's favorites in the business-to-business software and commerce area are Agile Software Inc. (NasdaqNM:AGIL - news), Vignette Corp.(NasdaqNM:VIGN - news) and Ariba Inc.(NasdaqNM:ARBA - news)
Internet consulting firm Scient Corp. (NasdaqNM:SCNT - news) and Internet infrastructure services firms Exodus Communications Inc.(NasdaqNM:EXDS - news) and InterNAP Network Services Corp.(NasdaqNM:INAP - news) were also among its Focus Stocks.
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Cisco Systems Inc. (NasdaqNM:CSCO - news), Broadcom Corp. (NasdaqNM:BRCM - news), Sun Microsystems Inc. (NasdaqNM:SUNW - news), Charles Schwab Corp.(NYSE:SCH - news), Lucent Technologies Inc. (NYSE:LU - news), Motorola Inc. (NYSE:MOT - news) and JDS Uniphase Corp.(NasdaqNM:JDSU - news) rounded out the Focus Stocks list.
The companies expected to come out in front are those with: leading market share, compelling operating models, strong cash positions, sufficient liquidity, sustainable growth, significant international opportunities, significant wireless and broadband opportunities, and strong management teams.
In the note, Meeker said growth in Internet usage shows no signs of abating any time soon and new and financially rewarding companies will continue to grow in many sectors to drive and support that growth.
Investors have increased their focus on cash-burn rates for early stage Internet businesses and become more focused on the rising supply of secondary stock after lock-up releases and the emergence of new traditional company competition for Internet pure plays, the report said.
On the near-term financing front, Morgan Stanley said the markets will remain open for well-capitalized names with 'defensible business models.' Internet infrastructure remains the strongest sector for financing.
The major flight to quality and selectivity among Internet companies is expected to continue, and early stage opportunities will see a large risk premium, Meeker added.
Internet stocks have taken a beating in recent weeks amid the Nasdaq's gyrations. The American Stock Exchange Internet index closed Wednesday at 501.68, down from a near-term high of 680.97 hit on March 24. |
