Biggs's Words, Profit-Taking Sink Shares of Web Leaders
By JOELLE TESSLER
Dow Jones Newswires
Internet stocks dropped on profit-taking Thursday as the Web sector saw
its second week of a correction after running up sharply during the fourth
quarter.
The slump came amid a backdrop of generally positive earnings reports
across the technology sector. But many analysts pointed to comments
made in Japan early on Thursday as one reason for the sell-off.
Among the biggest Internet stocks, Yahoo!,
Amazon.com and eBay were all down more
than 5% in afternoon trading. In the broader
market, the Nasdaq Composite Index was
down 54.60 to 2360.90 and Morgan
Stanley's high-tech 35 index was down 23.70
to 966.
The market was reacting in part to a speech
made in Japan on Thursday morning. Barton
Biggs, global strategist at Morgan Stanley Dean Witter, said the Internet
rally may be running out of steam. "I promise you that like all bubbles this
bubble will come to a very bad end," he said. "The trouble is none of us
know when ... . There is some reason to believe the Internet bubble is
close to its end," he said.
He also said that with the collapse of the biotech and gold bubbles, there
was a 50% drop in the first six weeks and another 50% drop over the next
six months.
Traders said Mr. Biggs's comments were neither surprising nor new, but
that Internet stock prices had gone so high, they were viewed as an excuse
to get out. "When you get something this frothy, people definitely look for
a reason to sell," said Arthur Hogan, chief market analyst at Jeffries & Co.
Hardly a Surprise
Indeed, other analysts were less apocalyptic. Volpe Brown & Whelan Co.
analyst Derek Brown said a first-quarter correction in the Web stocks is
hardly a surprise. But he noted it is hard to predict how much the group
will fall since "these stocks can move 50% in a day."
Many well-known Internet stocks have peaked at some point over the
past week and a half and have been heading lower ever since.
Yahoo, for instance, hit a high of 445 Jan. 11 and has dropped nearly 200
points since then. In afternoon trading Thursday, the stock was down 19
3/16, or 6.7%, at 268.
Amazon.com hit a high of 199 1/8, adjusted for a recent 3-for-1 stock
split, on Jan. 8 and has lost nearly 100 points over the past two weeks.
The shares were recently down 8, or 7.1%, to 105. Community site
GeoCities slipped 4 3/4 to 60 1/4, despite renewing a marketing
agreement with the online bookseller.
And online giant America Online has been sliding since it hit a high of 167
on Jan. 12. The shares were recently down 3 7/8, or 2.6%, at 144 5/8.
Getting 'Parabolic'
According to Brian Salerno, portfolio manager for Munder Capital
Management's Munder NetNet Fund, which specializes in Internet stocks,
the recent correction in the group is both long overdue and healthy.
"A lot of these names were exhibiting parabolic moves," Mr. Salerno said,
referring the steep jumps in many Web stocks during the fourth quarter.
"And those moves never last ... . They are never sustainable."
Analysts also say a growth slowdown could hit Net stocks hard.
Moreover, growth at many of these companies is expected to slow
sequentially because of seasonality. "Growth rates in the first quarter won't
look as impressive as they did in the fourth quarter," Mr. Brown said.
Growth rates should also be below
year-ago levels in the first quarter, he
added, since most of the Internet companies
are much bigger than they were last year
and must now grow revenue off a much
larger base.
Still, Mr. Brown said, while many Web
shares are unlikely to return to their highs
soon, the current correction is ultimately just a "pause."
Among other Web stocks Thursday, Excite was down 12 5/8, or 13%, to
84. Infoseek fell 4 9/16, or 6.9%, to 62. eBay slid 24 5/8, or 12%, to 189
1/8. And Onsale was down 2 13/16, or 6.1%, at 43 5/16.
Lycos bucked the trend, rising a modest 8 15/16 to 113 3/4 on the
Nasdaq Stock Market after London's Financial Times reported that the
Web company is seeking a strategic partner and has had informal
discussions with several telecommunications and media companies about
investing in it. According to the report, Eric Gerritsen, Lycos's vice
president for international business, told the Financial Times that the
company has informally talked with media and telecom companies about
an investment of up to $1 billion.
Also, shares of online music retailers CDnow and N2K -- which already
have announced plans to merge - were up sharply on rumors that Time
Warner is interested taking a stake in CDnow, or acquiring the company.
CDnow gained 2 5/16, or 12%, to 21 9/16, and N2K was up 11/16, or
4.8%, to 15, both on Nasdaq.
Thursday's Market Activity
Elsewhere in the technology sector Thursday, Lucent Technologies fell 6
7/8 to 108 5/8 on the New York Stock Exchange. The telecom-gear
maker posted a 140% surge in its fiscal first-quarter earnings thanks to an
accounting change related to its pension and post-retirement plans. But
even excluding items, Lucent easily exceeded earnings estimates and
revenue rose 5.7% (see article).
Enron gained 9/16 to 65 5/8 on the Big Board. The energy giant
announced Thursday an alliance with RealNetworks to offer high-quality
video to Internet service providers and big corporations over a fiber-optic
network it has been building nationwide. RealNetworks slipped 1 1/4 to
56 on Nasdaq.
Silicon Graphics gained 1 7/8 to 156 7/8 on the Big Board. The computer
maker reported a narrower-than-expected fiscal second-quarter loss, a
sign that the long-struggling company is making progress in cutting costs.
Merrill Lynch raised its rating on the stock to long-term "accumulate" from
long-term "neutral."
--The Associated Press contributed to this article. |
