This is worth reading if you are in denial on UBID...
2 13:11 T =Reality Check, Profit-Taking May Curb Web Stks In New Year
By Johanna Bennett
NEW YORK (Dow Jones)--Investors licking their chops at the ongoing Internet mania better remember that nothing lasts forever.
Market watchers - some still catching their breath from Monday's surge in Web stocks - appear to agree that the sector's impressive run will stumble after the new year as investors sell their shares following fourth quarter earnings reports.
Some predict a selloff will stem simply from investors looking to reap profits. Others say a much-awaited sense of reality will descend on a market that has spiraled out of control.
Either way, the run up that has driven prices for companies such as eBay Inc.(EBAY) and Amazon.com Inc. (AMZN) to more than $300 a share will end, according to market experts.
"My guess is that the fever will have broken" after fourth-quarter earnings are reported, said Jeff Matthews, portfolio manager for Ram Partners. What will happen to stock prices between now and then, however, is anyone's guess.
Shares of well-recognized names like Yahoo Inc. (YHOO), Amazon.com, and America Online Inc. (AOL), as well as newer players such as eBay have run up wildly in the last two months, driven in part by a reported spike in interest in online shopping during the holidays.
Ram Partners' Matthews predicted that Internet stocks' upward movement won't change for the rest of 1998, as the market remains free of selling pressure. Also, institutional investors won't consider selling their holdings until after the new year, Matthews added.
"If you're smart enough to own an Internet stock, you are not going to want to sell it until year end. You are going to want to show investors that you are smart and have these things," he said.
But Keith Benjamin, an analyst for BancBoston Robertson Stephens Inc., said the most well recognized Internet names, such as AOL, Yahoo¬, Amazon and eBay,will remain level through the rest of the year, then sell off 10% to 20% after strong fourth-quarter earnings reports.
Second-tier companies, however, are more of a mixed bag, Benjamin said. While some companies may see a surprise upside in their earnings, others like Onsale Inc. (ONSL) will not have a strong enough December to justify its stock's recent price surge, he added.
"It will be mixed," Benjamin said. "On any given day, these stocks can be up 5 or 10 points."
Others, however, were less sure.
The wild gyrations that have plagued the Internet sector over the past several weeks make predictions difficult, said Derek Brown, an analyst for Volpe Brown Whelan & Co.
"The challenging part right now is that the fundamentals in the industry remain very strong. They have not changed all that dramatically, yet the stock prices around the fundamentals have changed dramatically. Given the fact that the fundamentals have not changed, it is hard to judge where the prices will go," Brown said.
A downturn in the sector, he added, isn't unimaginable, although fundamentals are expected to remain strong for the foreseeable future.
"What would cause a downturn is if companies underperformed or if there was a change in perception," Brown said.
Ram Partners' Matthews agreed.
Many Wall Street pundits have long complained that the current values of Web stocks are inflated beyond all belief, especially considering the fact that many Internet companies have yet to turn profits. But corporations like Yahoo¦ and Amazon.com have been the darlings of Wall Street for most of the year, due
partly to public perception about the seemingly limitless possibility of Internet stocks.
That perception could be shaken in the wake of disappointing earnings and negative news stories, Matthews said.
Also, a rash of Internet-related initial public offerings are expected to quench investors' thirst for Web investments, Matthews said.
"Expectations will either be exceeded and met or not met and that is when you get a chance to sort the winners from the losers," he added.
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