OnSale, Egghead and Other Web Retailers Shares Fall
Menlo Park, California, Nov. 30 (Bloomberg) -- Onsale Inc., Egghead.com Inc. and other Internet-based retailers dropped on concern that a weeklong surge in share prices fueled by optimism for Web holiday sales.
Onsale, a Web auctioneer, fell 36 1/8 to 61 1/2, shaving about $693 million from its market valuation which reached as high as $2.1 billion in early trading today. Computer software and hardware retailer Egghead.com fell 6 1/8 to 25 1/2 in trading of 27.1 million, making it the second most active U.S. stock.
Online retailers have seen their shares skyrocket in the past week on expectations that more consumers will buy gifts over the Internet. Though online holiday sales are predicted to double to $2.3 billion this year, that's only about 1 percent of total holiday retail sales. An increase in fourth-quarter sales won't translate into profits for money-losing companies such as Amazon.com Inc. any time soon.
''It's just a little rationality coming into the world,'' said BancBoston Robertson Stephens analyst Lauren Cooks Levitan, who rates Onsale long-term ''attractive.'' The high share prices had investors wondering, 'Is there anything these guys could do that could meet those expectations?' '' she said.
Most of the selling is coming from individual investors, analysts said.
''They're very small lot sizes. It's electronic trading'' by individuals that are buying and selling stocks through electronic trading companies such as E*Trade Group Inc., said Steve Horen, an analyst at NationsBanc Montgomery Securities.
Short Covering
Today's decline in Internet stocks comes after short sellers were forced to buy shares at higher prices when the stocks began soaring last week, said Paul Foster, a trader at 1010 Wall Street, a Chicago options-strategy firm.
Short sellers borrow shares from securities firms in a bet that the stocks will decline, so they can buy the shares back at a lower price and pocket the difference as profit.
When the short sellers cover their positions, there's a sudden drop in demand for higher share prices.
No. 1 online book and music seller Amazon.com fell 24 5/8 to 192, which translates into a drop of $1.3 million in its market valuation although it's still worth $10.1 billion. Amazon.com had surged 71 percent since Nov. 16, when it unveiled its online video and holiday store.
Books-A-Million Inc., a Birmingham, Alabama-based company whose stock rose more than tenfold after it unveiled an improved Web site, fell 9 7/16 to 29 1/2, after earlier touching a 52-week high of 47.
CyberShop International Inc., which sells everything from housewares to gourmet food over the Internet, fell 9 1/8 to 18 1/2.
EBay Inc., the high-flying online auction house, fell 20 3/8 to 197 5/8 while No. 2 online music seller CDnow Inc. fell 2 7/8 to 24. Online travel services provider Preview Travel Inc. dropped 5 to 19. Creative Computers Inc., which sells PCs over the Internet, dived 18 1/2 to 37 7/8 as did rival Cyberian Outpost Inc., which plunged 7 5/8 to 25 1/2.
Internet search directories, which have unveiled holiday shopping guides with links to online merchants that give them a cut of sales, also declined. No. 1 Internet search directory Yahoo! Inc. fell24 15/16 to 192, while rival Lycos Inc. declined 6 1/4 to 59. Excite Inc. fell 4 3/16 to 48 15/16.
Software companies that enable electronic commerce tumbled as well. CyberCash Inc., whose software automatically collects and verifies credit-card data, fell 5 1/2 to 16 5/8. Electronic commerce software company Open Market fell 3 1/2 to 17 1/4.
''It's just the natural sell-off,'' said Volpe Brown Whelan & Co. analyst Derek Brown, who rates Amazon a ''buy.'' ''There's been a lot of expectations for what these stocks will do during the holiday season.''
Still, even with today's decline, Internet retailers are still much higher priced than they were two weeks ago. No. 3 online music store N2K Inc. remains 72 percent more expensive than its close of 9 7/16 on Nov. 16. It fell 3 13/16 to 16 1/4.
16:35:38 11/30/1998
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