Negative press will do nothing to bolster their image or share price.
By Emily Church, CBS MarketWatch
Last Update: 3:20 PM ET Oct 8, 1998
NewsWatch
NEW YORK (CBS.MW) -- Now's the time to be very cautious in
picking Internet stocks, a panel of four top Internet financial analysts
agreed Thursday.
It's certainly not an easy time to face a packed room of Net-sector
investors wondering what's whacked some 30 percent off the values of
their stocks since the market rout began this summer. Internet stocks on
Thursday, as tracked by the Amex Index of Internet Stocks ($IIX),
dropped 7.5 percent by midafternoon.
"It's gotten a little tighter recently, and I think it's
going to get tighter," said Merrill Lynch's Jonathan
Cohen, calling out Internet book and music retailer
Amazon.com (AMZN) as a stock that's "trading at
an enormous premium to the others."
Cohen said he's advising clients to use "a high
degree of specificity and a high degree of
discretion" if they're investing in Net stocks in this
environment.
As high-flying valuations of Internet stocks are
coming back to earth, investors can expect to see
losses and a bifurcation between the "blue chip"
Net companies and a bevy of smaller competitors,
the panelists agreed, speaking at the Internet World
trade show in New York.
Investors need to determine which companies "are
going to take advantage of the Net and which ones
are not," said Dan Rimer of Hambrecht & Quist.
Liquidity question
Beyond the valuation correction, one factor dragging Net stocks as a
group down farther and faster than the overall market is the liquidity issue,
noted Marc Usem of Salomon Smith Barney.
All told, the Net stocks have attracted a total market capitalization of
some $70 billion, which is peanuts relative to other sectors, and that's
partly behind some of the dramatic drops.
"These stocks have a huge, huge media presence" he said. "Yet how liquid
are they? Small amounts of trading in these stocks are making a larger
move."
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