IOM is still the Poster Child of Internet Hype, from The Wall Street Urinal:
Soaring Shares of 3Dfx Interactive Stir Memories of Iomega's Runup
By CARRIE LEE
THE WALL STREET JOURNAL INTERACTIVE EDITION
Shares of 3Dfx Interactive have caught fire, and they are burning a familiar
blend of fuel: a promising technology, the backing of the Motley Fool
investment forum and a burst of speculative on-line chatter.
The on-line investing forum began talking up
3Dfx on Jan. 5, saying it would add shares
of the San Jose, Calif.,
three-dimensional-graphics software and
chip maker to its so-called Fool Portfolio. The backing of Motley Fool set
off an explosion of on-line chatter and lifted the stock 14% one day alone
last week. 3Dfx shares, at 20 13/16 before the endorsement, hit a
52-week high of 26 1/2 on Jan. 6, and have remained strong -- trading at
26 1/4, up 3/4, Tuesday on the Nasdaq Stock Market.
The sudden spike in 3Dfx shares,
for some observers, smacks of the
wild trading seen in shares of
Iomega during much of 1996. The
data storage maker's stock swung
wildly as it was given rapt attention
on the Motley Fool's electronic
bulletin board, which is accessible
via America Online and the Motley
Fool Web site (www.fool.com).
Iomega started at around 3
(adjusted for stock splits), hit a high
of 27 and later fell back to 7 that
year. Today, the stock trades at
around 12 on the New York Stock Exchange.
Is 3Dfx facing the same fate?
Charles Boucher, an analyst at UBS Securities, says that as with Iomega in
1996, 3Dfx's upward movement of late stems from demand for the stock,
not from an improvement in the outlook for its business. "It looks like
hype, investing in hot names without understanding what the company
does and what the dynamics of the business are," he says. Mr. Boucher
believes the company is well positioned, but says the stock will be
vulnerable if the rally continues. "It's always a dangerous sign. Things that
the Fools recommend tend to get hyped. That has happened in the past."
The on-line chatter has been giddy. "For two months, I waited for this
moment," says one message posted on the Motley Fool bulletin board last
Wednesday. "Yesterday was the beginning of the time when the masses
begin to be interested in this stock. Don't care about a fair valuation of this
stock! ... For the next two months, tdfx is a hero," the posting says, using
the company's stock symbol as shorthand for its name.
The surge of excitement evoked a cautious response from the people who
run Motley Fool. After 3Dfx shares surged early last week, the investment
forum delayed making its planned purchase of $11,000 in 3Dfx shares.
Such delays aren't uncommon for the Motley Fool when it makes portfolio
changes, and it quickly stepped up to the plate once the stock eased back
from its highs. It made the purchase on Thursday, at a price of 25 5/8.
Gary Martin, 3Dfx's chief financial officer, has attributed the wild action in
the company's stock to the chatter on Motley Fool. The company declines
to comment further in advance of its fourth-quarter earnings report,
expected to be released on Jan. 27. 3Dfx has never posted quarterly
profit...... |
