The first to take the plunge was BancAmerica Robertson Stephens analyst
Keith Benjamin, who in his weekly Web report said the Internet stocks
are "close enough" to a bottom to "start to be more aggressive
accumulating a broader range of stocks." Not surprisingly, most of
Benjamin's picks are clients of BancBoston, including recent IPOs
Modem Media Poppe Tyson (MMPT: news, msgs), Multex.com
(MLTX: news, msgs) and NetPerceptions (NETP: news, msgs).
Though Benjamin stopped publishing his ridiculously conservative price
targets a while ago, few if any analysts have really completely stopped
trying to determine the appropriate valuation of an Internet stock. They've
just come up with some different measures to try and account for the
astounding growth most of the Web pioneers have experienced and are
expected to experience.
Slowdown?
It's not that Web valuations don't matter, argued Ryan Jacob, portfolio
manager of The Internet Fund. It's just that their values are based on
expectations for a certain level of growth. That would explain Smith's
"third month effect," since investors are used to seeing Internet companies
crush Wall Street expectations every quarter.
"Clearly, many of these companies are executing very well, growing 20
[percent] to 40 percent a quarter," Jacob said. "Unless that changes,
many of these valuations are justifiable, especially at these levels."
Indeed, with higher interest rates, some disappointing Media Metrix
(MMXI: news, msgs) traffic figures for April and concerns about PC
sales, an Internet slowdown may be exactly what's worrying investors.
But Jacob and Smith aren't buying it. "Internet usage isn't slowing at all.
Not at all," said Smith, adding that all the Web executives he's talked to
have not seen any unusual slowdown in traffic.
"Valuation will become a major issue when the hypergrowth slows, but I
don't think we're anywhere close to that," Smith said, "The hypergrowth
could last for years."
Darren Chervitz is a reporter for CBS MarketWatch.
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