Street Wonders Which Way
Internet Stocks Will Go Next
By LISA BRANSTEN
THE WALL STREET JOURNAL INTERACTIVE EDITION
SAN FRANCISCO -- As shares of the highest-flying Internet stocks
retreated for a second session Wednesday, the question across
cyberspace was: Is this the beginning of the end or just a little air coming
out of over-inflated Internet balloons?
The answer may be somewhere in between. After the close of trading,
bellwether Yahoo! announced a stronger-than-expected quarterly profit
on a surge in registered users and page views, and set a 2-for-1 stock split
-- all good news for Yahoo bulls (see article).
The results may quell some fears of a sharp sell-off: Ahead of the release,
shares of Internet companies stumbled for a second consecutive day amid
ratings cuts from some analysts and a Heard on the Street column in
Wednesday's Wall Street Journal questioning the value of Net stocks.
Before Tuesday's modest retreat, Amazon.com, the on-line bookseller,
had seen its shares more than triple since the start of June, while shares of
Yahoo had risen 82% in that period.
Analysts attributed this week's dips to a host of reasons including investors
taking some cash off the table after raking it in on these investments; some
jitters ahead of the Yahoo report; and some general cooling of the
speculative sizzle that has gripped these issues.
Also, an analyst at NationsBanc Montgomery Securities cut his rating of
Amazon to "hold" from "buy" based on the huge run-up in the stock's
price. Its shares dropped 15, or 12%, to 107 1/8 Wednesday. And
Brown Brothers Harriman cut its short-term rating on Lycos to "hold" from
"buy," while leaving its long-term rating at "buy." Analyst Dawn Simon said
"We anticipate price volatility with price corrections in the 6% to 10%
range, including [Tuesday's] sell-off, as possible takeover speculation
cools and momentum-focused investors leave the segment." Lycos slipped
7 1/2, or 8.8%, to 77 1/2 on Nasdaq.
Still, despite the short-term pessimism, nobody really knows what these
highly volatile stocks are going to do in the near term. Both analysts and
the Web surfers who frequent stock message board sites are divided
about what the future brings.
"YHOO will close above 200 today, guaranteed!" wrote "cpq investor" on
a Yahoo Finance message board Wednesday. (It traded as low as 175 on
the day, rallying to close at 186 3/16, down 4 13/16.) "Why not? With
split announcement and a good earnings report it is too risky to try shorting
this babe," the posting said.
On the other hand, a surfer identified as "stockvirgin98" wrote: "When this
bubble bursts expect to see the market to be very jittery for a while. If you
read books on the market ... you will see it stated over and over again that
the fireworks in speculative stocks MARKS THE END of every bull
market."
Both Mary Meeker, an analyst at Morgan Stanley Dean Witter & Co.,
and Keith Benjamin, an analyst at BancAmerica Robertson Stephens &
Co., believe that stocks may drift lower for a period but that this isn't the
beginning of a serious retreat in the sector.
"I think we are in a trend of hitting higher highs followed by higher lows,"
Ms. Meeker said.
Mr. Benjamin noted that these highflying stocks had drifted 15% to 20%
lower before events such as the NBC investment in Internet content
company CNET renewed enthusiasm for the sector. If the market returns
to a period where there is little news about these companies, that could
happen again, he said.
But both Mr. Benjamin and Ms. Meeker are bullish on Amazon and
Yahoo in the long term.
And even the cynics seem to have at least some faith in the Internet
companies. Along with the reference to "books on the market"
Stockvirgin98 provides a convenient link where readers can go to find the
book: at Amazon.com.
Wednesday's Market Activity
Elsewhere in the technology sector Wednesday, Motorola dropped 2 3/4
to 52 1/4 on the New York Stock Exchange. Late Tuesday, the
electronics giant posted a one-cent-a-share profit, beating the lowered
expectations of analysts, but warned that the third-quarter will be weak as
well (see article).
Apple Computer rose 2 1/16, or 6.8%, to 32 9/16 on Nasdaq. In his
keynote address at the MacWorld trade show, Chief Executive Steve
Jobs said the computer maker will post its third straight quarterly profit
and said that Apple's new iMac computer will help restart revenue growth
in the second half of the year (see article).
Source Media gained 2 11/16 to 21 3/8 on Nasdaq amid marketplace
talk that Yahoo may announce a deal to acquire the company.
Semtechdropped 4 1/16, or 28%, to 10 3/8 on Nasdaq. The analog
semiconductor maker expects to report second-quarter earnings below
analysts' expectations, due to the Asian economic crisis and weak demand
from the personal-computer and automated-test-equipment markets.
Asymetrix Learning Systems surged 1 17/32 to 10 1/4 on Nasdaq.
Hambrecht & Quist analyst Genni Combes and NationsBanc Montgomery
Securities analyst Keith Gay issued "buy" recommendations on the stock
of the computer training company Wednesday morning.Those two reports
followed a "buy" recommendation issued by BancAmerica Robertson
Stephens analyst Howard Block on Tuesday.
Oracle rose 11/16 to 23 9/16 on Nasdaq. Prudential Securities initiated
coverage of the database software maker at "buy." |
