Silicon Valley
Jan 05, 1999
The Coming Year: A Slew of Events That Will Rock Net Stocks
By Suzanne Galante
Staff Reporter
SAN FRANCISCO -- All the presents have been opened, the fruitcake has been tossed and the Internet mania about e-holiday has yet to subside. But as Internet companies forge ahead into 1999, they're going to have to start living up to their hype. Over the next few months, there are a couple of important dates that analysts and fund managers are watching to see just how much the Net will net.
Morgan Stanley Conference, Jan. 5-7
The Morgan Stanley Dean Witter Internet, Networking and Software Conference is the first tech conference of the year. The press is kept out of this one (and it's a damn shame, as it's at the sumptuous Phoenician resort in Scottsdale, Ariz.), but fund managers will be watching it closely. Ned Brines, co-manager of the Phoenix Aggressive Growth fund, says the conference will be a chance for institutional investors to get a good look at some of the Internet companies they recently bought into. Brines holds positions in America Online ( (NYSE:AOL - news) ), Amazon.com ( (Nasdaq:AMZN - news) ) and Inktomi ( (Nasdaq:INKT - news) ). "Some institutional investors chased some of these stocks because they had to own them," says Brines. "This will be the first chance to take a look since the big run-up." With all this money hanging on every word, the conference, he predicts, could create some big stock moves. "If anyone sneezes in the wrong direction," says Brines, "the stock will fall 10 or 15 points."
Yahoo! Earnings, Jan. 12
The biggest search-and-navigation site on the Internet is always the first to report its quarterly results, giving an indication of what is to come from its peers. Yahoo! ( (Nasdaq:YHOO - news) ) plans to release its numbers Jan. 12. Analysts are expecting profits of 16 cents a share for the fourth quarter and 43 cents a share for 1998, according to First Call. That compares with profits of 3 cents and 2 cents for fourth-quarter and full-year 1997 results, respectively. "Yahoo! is the first to report and already trading up, like it always does," says Virginia Stuart, an analyst for Scudder Kemper Investments. "If they have a blowout quarter on the top line, that will get others that are cheap on a relative basis moving up again."
DLJ's Internet Conference, Jan. 13-15
Another opportunity for Internet executives to gloat over their fourth-quarter successes will be at the Donaldson, Lufkin & Jenrette Internet Conference Jan. 13-15 in San Francisco. Keynote speakers include AOL CEO Steve Case, Amazon.com CEO Jeff Bezos and Yahoo! CEO Tim Koogle. The three-day conference will host several other Net hotshots such as Inktomi, Broadcast.com, eBay ( (Nasdaq:EBAY - news) ) and @Home ( (Nasdaq:ATHM - news) ). "This is a chance for institutional investors to get more exposure to the models and the growth rates," says Emmy Sobiesky, a portfolio manager and tech specialist at Nicholas Applegate. "It gives these Internet companies broader exposure and broader ownership."
eBay's First Time, Jan. 26
Wall Street darling eBay will fess up to its first quarter as a public company. Analysts are expecting the company to report quarterly earnings of 4 cents a share, according to First Call. That's one penny less than the company reported for its September quarter. Full-year earnings are expected to be 16 cents a share. Investors have pushed the Internet auctioneer's stock up nearly 600% since its debut in late September. eBay is expected to report its results Jan. 26 after the markets close.
Fourth-Quarter PC Sales Figures, Jan. 25
New personal computers translate into more Internet users. Those numbers are being released to the public Jan. 25; beating or missing the numbers could move those stocks. International Data estimates that 10.5 million units were shipped in the fourth quarter, up 18.2% over the fourth quarter of 1997. "The Internet is a very big driver for getting people to buy PCs," says Schelley Olhava, associate PC desktop analyst for IDC. "Another big driver is that prices are so good," she says, citing a $399 emachines system and IBM's ( (NYSE:IBM - news) ) $599 Aptiva.
Amazon.com Earnings
All eyes will be focused on the mother of all Internet retailers when Amazon.com reports its results. An Amazon spokeswoman says that the company doesn't know when it will report, but last year, the fourth-quarter earnings came on Jan. 22. Details on e-commerce will be closely scrutinized. "Total advertising is less than 3% on the Web and even smaller for total commerce," says Sobiesky. "It's growing from such a small base that the high growth rates are sustainable growth rates. This was the first real Christmas where a lot of people were shopping on the Internet." She says that there were more than 6 million Internet buyers this holiday.
The Gloves Are Off
After the throng of recent Internet IPOs comes the period when insiders are able to sell some of their shares on the open market. Because these companies have such small floats, any sizable chunk of new stock may dilute the shares and submerge share prices. For example, eBay said in a filing with the Securities and Exchange Commission that 24.55 million restricted shares will be available for sale in the public market 120 days after its Sept. 24 offering. That means the shares could come into the market in late January. eBay's stock is up 409% since the IPO, and this will be the first chance for most insiders to cash in on all their hard work. "Insiders are going to book something," says Suzanne Zak, CEO of Zak Capital. "They'd be crazy not to."
More Dog-and-Pony Shows
Just when you thought investors and fund managers attended enough Internet conferences in January, more are on the way. The good news is that they are broader conferences that encompass all technology sectors. Dain Rauscher Wessels is holding its tech conference Feb. 15-18, and Goldman Sachs is hosting its Technology Symposium Feb. 8-12 in New York City. In addition, Internet companies that didn't attend the earlier conferences, like Lycos ( (Nasdaq:LCOS - news) ), will be presenting. Raymond James is holding its Institutional Investor Conference Feb. 28-March 3. Meanwhile, attendees of the Hambrecht & Quist Internet conference March 1-3 in Utah will be able to end their days on the slopes or in the warming huts.
Heaping Helping of IPOs
The recent run in Internet stock prices sent a flood of companies back to the markets, including Ticketmaster ( (Nasdaq:TMCS - news) ) , Xoom.com, AboveNet Communications, audiohighway.com and uBid ( (Nasdaq:UBID - news) ). Those that didn't already have initial filings with the SEC decided it was as good a time as any to start the IPO process. And the floodgates will likely open wide with the start of the new year. Scudder Kemper's Stuart says one of the hot IPOs coming up in the new year is PC Order. Another IPO on the way is the joint venture of CBS ( (NYSE:CBS - news) ) and Data Broadcasting ( (Nasdaq:DBCC - news) ), Marketwatch.com, expected in late January. Shares of DBCC, in anticipation of the IPO, have more than doubled in the past two weeks.
Brines, the Phoenix fund manager, says that "1999 is going to be an exciting year." He adds that "1998 saw the stock prices rise in anticipation, as '99 will be a year of proving business models. If they prove that they can deliver revenues and eventually earnings, those stocks will continue to run."
© 1999 TheStreet.com, All Rights Reserved.
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