While Doubters See Icebergs,
Internet Stocks Keep Steaming
By NICK WINGFIELD
THE WALL STREET JOURNAL INTERACTIVE EDITION
SAN FRANCISCO -- Before shares of Yahoo! Inc. closed Friday at $102.375
-- below an all-time high of $105.75 hit earlier in the day -- the bears
chattering away on Internet bulletin boards began to grow insistent.
"All rational analysis is gone if this stock ends at over 100 today,"
one denizen of the Yahoo discussion group on Yahoo's own finance
bulletin boards wrote -- a denizen who was surely disappointed, as
markets closed, at the lack of reasonable analysis in the world. "Is
there some symbolism between Yahoo and the Titanic?" asked another. "An
overhyped ship/movie and an overvalued/overhyped stock. Sinkable, I
think YES!"
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Close
3/27Close
4/3ChangeAmazon.com82 3/49312%AOL66 7/874 1/211%CDNow23 3/828
3/821%EarthLink56 1/867 1/420%Lycos42 5/85938%Yahoo88 15/16102 7/1614%
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If Internet stocks are sinkable, one thing's for certain: The waters
were clear of icebergs this week. On a day when the Dow cracked 9000 for
the first time before falling back, Yahoo's two-day dance above the
100-a-share mark was among the most impressive performances in a
phenomenal recent rally in Internet stocks. Web-navigation service Lycos
Inc. and cyberbookseller Amazon.com Inc. also soared to all-time record
territory, as did CMG Information Services Inc. and America Online Inc.
Clearly, the prospect of continued meager profits in coming years -- if
any at all -- isn't enough to sink Internet stocks. For now, Wall Street
seems content to base the value of Internet companies on the financial
performance they may turn out in the early days of the new millennium,
not on the red ink many of them are swimming in today. Until then, firms
like Excite, Amazon and others will have to spend aggressively to
capture market share and to build their brands into household names.
Keith Benjamin, an analyst at BancAmerica Robertson Stephens & Co.,
believes investors are now looking as far out as 2001's earnings when
valuing Internet companies. Accordingly, this week he raised his share
price target on one on-line stock, AOL, to $85 from $75, basing the new
figure on a 50 multiple of 2001 earnings per share instead of a 50
multiple of 2000 earnings per share. He wrote that he was encouraged
this week by AOL's announcement of a trial for high-speed access to AOL
using digital subscriber line, a technology that could accelerate
connection speeds by up to 25 times that of conventional modems. The
technology isn't likely to be widely deployed anytime soon, but, if and
when it is, Mr. Benjamin said, it will encourage users to stay on-line
longer, buying more goods and scanning more advertisements.
In the meantime, bad news for other high-tech sectors has actually
benefited Internet stocks, analysts believe. Profit levels at hardware
firms such as Intel Corp. and Compaq Computer Corp. are suffering due to
the explosion in popularity of sub-$1000 personal computers. But
ironically, their pain is seen as the Internet's gain as legions of new
users log on to the Net with the low-cost machines.
Even investor profit-taking -- if and when it happens -- may not set
Internet stocks back for long, analysts believe. "There have been a
series of cycles where these stocks rally, then there's some
profit-taking and then they rally again," said Andrea Williams, an
analyst at Volpe Brown Whelan & Co. "It's three steps forward, two steps
back," added Henry Blodget, an analyst at CIBC Oppenheimer & Co. |
