Internet Stocks Surge, Sending
Yahoo! Above $100 Threshold
By NICK WINGFIELD
THE WALL STREET JOURNAL INTERACTIVE EDITION
SAN FRANCISCO -- Internet-related stocks continued their remarkable surge,
sending many to levels at or near all-time highs, as analysts grasped to find an
explanation for the sector's recent momentum.
Most remarkable among the Internet stocks was
Yahoo!, which finally cracked $100 a share, a
milestone that seemed unthinkable two years ago
when the Internet-navigation service went public
at $24.50 amid the first wave of Internet hype.
Yahoo surged 6 1/16, or 6.2%, to 103 7/8 on the
Nasdaq Stock Market, despite a downgrade from
Everen Securities on the stock to "near-term
market perform" from "outperform."
Meanwhile, the Nasdaq Composite Index gained
5.30 to 1852.96 and Morgan Stanley's high-tech
35 index rose 1.59 to 551.90.
Two other Internet stocks hit their own all-time
highs, also on Nasdaq: On-line bookseller
Amazon.com surged 4 15/16, or 5.5%, to 95
1/16, while Lycos, a Yahoo competitor, jumped 7 3/4, or 15%, to 58 7/8, after
leaping 6 7/8 Wednesday.
"These stocks have been moving up since the beginning of the year with
incredible strength," said Arthur Newman, an analyst at Gerard Klauer
Mattison.
"To some extent it may be a supply-and-demand issue: there's only a few
players and people keep putting more and more money into the same names,"
he said.
Still, for most analysts, the stratospheric
valuations of Internet stocks was difficult to
comprehend, considering that few of the stocks
have shown better than meager profits. But
Wall Street investors appear to have largely
suspended traditional valuation measures for
Internet stocks, based on the belief that early
leaders like America Online, Yahoo and
Amazon will blossom into full-fledged
powerhouses down the road.
As a result, most Internet stocks are "news-driven," said Volpe Brown Whelan
& Co. analyst Andrea Williams. In other words, investors are now more
concerned about revenues and market share than profits.
And it appears Wall Street needs little more than a press release touting a series
of deals to pour money into a stock. That apparently came Wednesday, when
Lycos announced that it had closed commerce deals with on-line merchants
worth $30 million in March, including an $18.5 million deal with music-seller
CDNow.
Thursday, CDNow rose 3 3/8, or 13%, to 29 7/8, while music retailing rival
N2K gained 1 13/16, or 6.3%, to 30 3/4. Auctioneer OnSale gained 2 1/2 to 35
7/8, all on Nasdaq.
But Ms. Williams said a number of those deals were already factored into her
financial projections for Lycos's quarter. "Just based on valuation reasons, we
think the stock has gotten ahead of itself," Ms. Williams said.
Still, Ms. Williams continues to recommend Lycos's stock to investors. That's
because she believes that there's the potential for still more good news from the
company to lift the stock. One possibility: CMG Information Services, which
owns nearly half of Lycos, is reportedly looking to sell its stake in the firm to a
large media company, which could give the stock another lift. For its part,
CMG added 4, or 6.3%, to 68 on Nasdaq.
Some of Yahoo's good news may have benefited Yahoo. "These groups tend to
move a lot in sympathy," said Gerard Klauer Mattison's Mr. Newman. But the
run-up in shares of Yahoo, which generates revenue from advertising and
commerce, may reflect optimism about its first quarter, results for which will
be released next week. Paul Noglows, an analyst at Hambrecht & Quist LLC,
predicts the company will post a five-cents-a-share profit on $26.5 million in
revenue, compared with a two-cent loss, adjusted for a stock split and an
acquisition, on $9.5 million in revenue in the year-ago quarter.
"You typically see this type of anticipation in front of a quarter," said Mr.
Noglows. "I expect them to meet or beat" expectations.
Other companies supported chiefly by advertising had mixed days. Excite rose
7/8 to 55 3/8, Infoseek edged down 3/8 to 20 7/16 and CNET jumped 1 5/8 to
28 1/8, all on Nasdaq.
Internet-access firms were also big gainers on Thursday. The sector got a lift
from news Wednesday that AT&T and Microsoft are raising monthly access
charges on their WorldNet and WebTV Internet services. Concentric Network
rose 3 1/2, or 18%, to 22 5/8, MindSpring Enterprises leapt 4, or 6.5%, to 65
1/4 and EarthLink Network jumped 7, or 12%, to 66 1/8, reflecting an extra
boost from news that it passed the 500,000 subscriber mark.
No. 1 on-line provider AOL gained 1 5/16 to a record 74 1/4 in New York
Stock Exchange composite trading.
Investors cheered a price increase by AOL earlier this year, which most saw as
a crucial step to boost the firm's bottom line. Keith Benjamin, an analyst at
BancAmerica Robertson Stephens & Co., believes the price changes by AT&T
and Microsoft underscores how those firms are striving to make their Internet
services profitable. "You saw that the pricing umbrella has risen," Mr.
Benjamin said.
Thursday's Market Activity
Elsewhere in the technology sector Thursday, Security Dynamics Technologies
fell 15 9/16, or 37%, to 26 15/16 on Nasdaq. The company projected
first-quarter earnings below expectations. The maker of computer data-security
products said Thursday morning that it expects first-quarter earnings from
operations to be 14 cents a share, compared with a First Call estimate of 19
cents a share (see article).
Rogue Wave Software fell 6 7/16, or 42%, to 9 1/16 on Nasdaq as investors
digested its warning that fiscal second-quarter net income would come in below
expectations. The company expects to report earnings of four cents to five cents
a diluted share, excluding nonrecurring acquisition and move-related charges,
on revenue of $10.2 million for the quarter ended March 31. A First Call
survey of three analysts produced an average earnings estimate of 13 cents.
Rogue attributed the weak results in part to the integration of Stingray
Software, which it acquired March 2 for $21 million in stock. Other factors in
the anticipated earnings disappointment include delays with a number of large
orders and the effects of a sales reorganization last fall.
Cambridge Technology Partnersrose 5/16 to 49 13/16 on Nasdaq.Lehman
Brothers initiated coverage of the technology-consulting firm with a "buy"
rating, and set a 12-month price target of 65.
CyberGuard rose 1 13/16, or 19%, to 11 1/2 on Nasdaq amid continued market
speculation that the maker of network-security software is a takeover target.
Company spokeswoman Lisa Thornhill declined to comment on the rumors. "If
we had something to report, we would do so immediately," she said. |
