Flight-to-quality bidding begins
Quarterly results may be catalyst; Ariba tracks higher
By Bambi Francisco, CBS MarketWatch
Last Update: 10:59 AM ET Apr 5, 2000 Internet Daily
Net Headlines
<<NEW YORK (CBS.MW) -- Net stocks had a rocky start Wednesday, but after a morning dip, a few Internet stocks made their way onto positive terrain as investors took heart that first-quarter results would be strong and awaited earnings from Yahoo after the close.
"The results from some of these high-tech stocks will be spectacular, especially in the infrastructure stocks," said James Glickenhaus of investment firm Glickenhaus & Co. "Some Net companies won't do so well. And that's why we're starting to see a flight-to-quality, especially at these levels."
Shares of Ariba bolted pass the group, climbing 8 percent after announcing that it would beat first-quarter sales projections by as much as 30 percent.
Meanwhile, the 17-stock Goldman Sachs Internet Index started lower, then added 1.2 percent within the first half hour of trading. The Net barometer slipped 1.2 percent Tuesday, after plunging 18 percent at its lows of the session as the Nasdaq Composite took a 574-point free fall.
The Amex Internet Index slipped 0.6 percent, after it made a hearty comeback from a deficit of 16 percent earlier in Tuesday's slam session.
Indeed, despite Wednesday's dismal opening, the rally into Tuesday's close is significant, as noted by Mike Hurley, an analyst at E-Offering. "It looks as though we may have seen a 'climax-bottom'," he said, referring to Tuesday's activity.
Besides Ariba, other stocks gaining include America Online (AOL: news, msgs), up 3/4 to 63. Go2Net (GNET: news, msgs) added 1/8 to 69. Ariba (ARBA: news, msgs), Internet Capital Group (ICGE: news, msgs), Ventro (VNTR: news, msgs), and NaviSite (NAVI: news, msgs) also rose in the early going.
Fundamentals still strong
Technology bulls were on hand Wednesday morning to remind the Street that while valuations needed to come in, that doesn't mean fundamentals have changed.
"We view the market action over the last few days as a valuation not a fundamental adjustment," said Steve Milunovich, an analyst at Merrill Lynch, adding that results from the investment bank's surveys indicate "bullishness on spending across almost all sectors."
Within technology, "the place to be is the infrastructure space," he added.
Performance catalysts
Yahoo (YHOO: news, msgs) fell 8 1/4 to 159. In the last eight times Yahoo has reported earnings, shares have fallen five times on the next day. In the one week prior to the reporting day, Yahoo shares have fallen on average. But at most, the stock had slipped by 12 percent, according to E-Offering.
This time around, Yahoo shares have taken their largest beating prior to its quarterly report, falling 22 percent from a recent high of 200, which was struck on March 27.
The Net blue chipper is expected to kick off first-quarter earnings season when it reports results after the market closes. Wall Street expects Yahoo to earn 9 cents a share, vs. 3 cents a share last year and 10 cents a share for the previous quarter. First-quarter sales are expected to grow to $204 million from $104 million in the year-ago period and slightly ahead of $201 million in 1999's holiday quarter. Merrill Lynch has estimated that Yahoo could report as much as $220 million in quarterly sales.
Ariba ran up 3 7/8 to 102, extending Tuesday's 9 15/16 jump. The business-to-business e-commerce enabler said it expects to beat quarterly revenue expectations by as much as 30 percent due to the surprisingly high number of deals it won in the quarter.
In the first three months of the year, Ariba announced a series of exchange deals across several industries including the travel industry. Ariba inked a deal with Sabre in March. Sabre was a marquee account for Commerce One, according to an Ariba spokesperson. Additionally, Ariba won deals in the computer industry with Dell Computer and IBM. On Tuesday, Ariba added to its wins in the financial services industry. It announced an alliance with Bank of America to form an exchange for the bank's customers.
Ariba now enjoys twice as much coverage from Wall Street analysts than it did in the beginning of the year, according to First Call. There are now 24 analysts covering this as-of-yet one-year-old publicly traded company. The consensus rating is a "buy.">> |
