From TMF thnx to Reuters.
By Huw Jones
NEW YORK, July 8 (Reuters) - As Internet stocks retreat for the second straight session
Wednesday, there are signs that the stalled cybertrain may be hitting more than just profit-taking
buffers, analysts said.
"These stocks have a phenomenal downside risk from here still, and the tops we saw are probably
going to stand for a long time," said Robert Dickey, a technical analyst at Dain Rauscher Wessels.
The American Stock Exchange's Internet Index <.IIX> hit a new lifetime high Tuesday before the
selloff began.
"We have just witnessed the peak in the frenzy."
Internet stocks closed down sharply in heavy volume Tuesday after hitting new highs, which Dickey
said was a sign that the last investor has gotten in.
"I am looking for corrections of well over 50 percent," Dickey said.
But Gruntal & Co's technical analyst Peter Green said the picture was more mixed.
Sector leaders Yahoo! Inc. (Nasdaq:YHOO) and America Online Inc. (Nyse:AOL) have not
topped out, but others such as Lycos Inc. (Nasdaq:LCOS) and Amazon.com (Nasdaq:AMZN)
have, Green said.
"The pullback is taking down some of the soldiers, but the generals remain," Green said, adding that
the sector overall could see further downside correction of 10 to 15 percent.
Yahoo! reports earnings after the close Wednesday.
First Call expects it to post a $0.09 per share profit, but a so-called whisper number of $0.12 is
being bandied around Wall Street.
"I suspect Yahoo! will have good numbers which have the potential to ignite another rally, but we
are likely to see continued volatility," said Andrea Williams, equities analyst, interactive content, at
Volpe Brown and Whelan Co.
Midday, Yahoo! was off 7-7/8 at 183-1/8. Amazon.com shed 15-1/16 to 107-1/16. Lycos fell
eight to 77. AOL was off 3/4 at 108-1/2. Excite Inc. (Nasdaq:XCIT) was off 4-3/4 at 91-1/2.
Netscape Communications (Nasdaq:NSCP) rose one to 37.
Nevertheless, this week's selloff has barely dented the dizzying gains notched up so far in 1998.
For the year, Yahoo! is still up 165 percent, Amazon.com up 256 percent, Lycos up 87 percent,
AOL up 145 percent, Excite up 203 percent, and Netscape up 54 percent.
But another topping sign in the sector was the pickup in the number of Internet companies stepping
forward to make their initial public offering, said Ken Fleming, an analyst at Renaissance Capital
IPO Fund.
"This is probably the most we have seen and, a lot of the time, that's a bad sign," Fleming said.
Other analysts were, however, more bullish.
"They are coming under a bout of profit-taking," said Joseph Barthel, chief investment strategist at
Fahnestock & Co. "All they are is done on a short-term basis."
The American Stock Exchange's Internet Index <.IIX> has not fully exploited the base it broke out
of, Barthel added.
The index is up 49 percent so far this year, outpacing the Standard & Poor's 500-stock index's
respectable 19 percent gain over the same period.
"Falling back to about 340 is your maximum risk near-term," Barthel said.
Wednesday, the index was flat at 388.53, about 3 percent off its lifetime intra-day high of 399.41
reached Tuesday.
"Clearly the profit-taking is a rational response to an incredible run-up," Volpe Brown's Williams
said.
"It does not concern me if these stocks sell off for another few days," she said. "The news flow will
remain positive, and selloff could be healthy for these stocks."
Gruntal's Green said Lycos and Amazon.com should find support at 65 and 94 respectively, and
Yahoo! could back and fill a chart gap down to 190.
Quote for referenced ticker symbols: YHOO, XCIT, NSCP, LCOS, AOL, AMZN
c 1998, Reuters |
