Online Retail Stocks Poised To Fall With New Year, Some Say
12/29/98 13:44
NEW YORK (Dow Jones)--Despite a recent report that Internet
retailers are enjoying a holiday season beyond all expectations,
some industry analysts and investors still expect many of these
stocks to come under steep selling pressure begining next week
and continuing throughout the first quarter.
The price declines, they said, would likely reflect two phenomenon:
profit-taking in the new year by individual investors, and repositioning
by fund managers as Internet mania begins to wane.
"My personal theory is that most of the big (Internet retail)
names will peak at the close of trading on Thursday," said Jeffrey
Matthews, a portfolio manager for Ram Partners, referring to the
final trading sesion of the year.
That's in part because many of the small investors who have
seen their holdings increase several fold in names like Amazon.com
Inc. (AMZN), Ebay Inc. (EBAY), OnSale Inc. (ONSL), and CDNow Inc.
(CDNW) may be itching to sell in the new year, when they won't
be forced to pay capital gains taxes for 1998.
Matthews added he's also hesitant to draw any firm conclusions
from a study by Boston Consulting Group and shop.org, a trade
association of online retailers, that said sales for 17 leading
online retailers rose 230% year-over-year between Nov. 23 and
Dec. 20.
"It's a little early to know how the holiday season will shake
out from an online perspective," he said, noting that any later
studies depicting a less rosy picture could seriously undermine
some of these stocks.
Even if such a report never materializes, says William Blair
& Co. analyst Abhishek Gami, many online retailers must prove
that they can survive beyond the bustling holiday season.
"There is an inevitable dropoff in business due to seasonality,"
Gami said. "And there will be some knee-jerk investor reactions
to quickly dump stocks that don't show growth."
Particularly vulnerable, he added, will be Internet retailers
with a single source of revenue from a single product, especially
those that feature more expensive merchandise. |
