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Technology Stocks : Amazon.com, Inc. (AMZN) -- Ignore unavailable to you. Want to Upgrade?

To: Urlman who wrote (13041)	8/9/1998 7:02:00 PM
From: llamaphlegm	Read Replies (1) \| Respond to of 164684

Thanks for the URL, Ming Check out the article at this site: equityanalysis.com Overvalued Stock Pick for the month of August 1998 The Internet Frenzy The massive rally in Internet stocks of late has caught everyone's attention. Stocks that have nothing more than a mere presence on the web, a bookstore in the case of Amazon.com, a search engine in the case of Excite and Yahoo!, or a web access service, like America Online, now sport market caps larger than many fortune 500 companies, whom are hundreds of times larger than these new upstarts. Furthermore, few of the latter are profitable, or even show signs that they can survive as business entities; even those who are, such as Yahoo! and America Online, are trading at absurd price/earnings multiples. Everyone seems to agree that Internet stocks are overwhelmingly expensive, and that their present valuations discount years of anticipated growth and earnings down the road. But investors keep buying them and analysts keeps recommending them. For everyone has found that it was very easy, up to now, to make a quick buck on these stocks. All one has to do is to buy one, wait a couple of days, and sell it at a handsome profit. As a result, Internet stocks now trade million shares a day, toppling major companies like Intel, Microsoft and Compaq as the volume leaders on both the NYSE and NASDAQ. The question now is: when will this madness end? Our opinion is that the bubble is about to be pierced. Several indicators point to the fact that we're at a major top, and very possibly an all-time top, for Internet stocks: 1.Volume has peaked. Stock market bubbles behave much like pyramid schemes. Each upward thrust during the rally requires more money flowing into these stocks to sustain. During the latest run, daily average volume has averaged 35 million shares a day for Yahoo!, America Online, and Amazon.com, the 3 largest Internet stocks by market capitalization. Together, these 3 stocks alone accounted for 10% of the daily dollar volume on all U.S stock exchanges. The tally is even more staggering when other lesser Internet stocks are accounted for. A further run-up will require even heavier volume, which will make shares of these companies by far the most actively traded shares in the world. That cannot happen, as there is simply not enough liquidity out there to maintain such a rally. 2.Market Capitalization has peaked. If one analyzes the first major Internet rally, namely Netscape's rise and fall in 1995-1996, one sees that the latter's price climbed 540% in 6 months, from its IPO of $12.5/share, split-adjusted, to $80/share. Its market cap peaked at around $8 billion. It shed 50% of that value during the ensuing 3-month decline, as the bubble was pierced by declining liquidity. The current rally has sent Yahoo!'s shares up 1900% in 2 years, Amazon.com's shares up 1700% in a year, and America Online up 2000% in the last 2 years. Yahoo!'s market cap recently peaked at 9.7 billion, Amazon's at 7.2 billion, and America Online's at a staggering 30 billion. 3.Most Internet stocks failed to rally on good earnings news from Yahoo! and Amazon.com these past 2 weeks. Yahoo!'s earnings beat street consensus estimates by more than 60%. An important double-top chart formation has appeared, with the first top occurring at Yahoo!'s earnings report date on July 9th, and the second one occurring at Amazon.com's earnings report date on July 22nd. Both tops were accompanied with peaks in volume, which means that a significant resistance level, or top, has been established. 4.Volume has dropped significantly as the stocks declined from the double top formation. This confirms our suggestion that liquidity has been exhausted. This is a classical indication of an impending correction after a massive long-term rally.