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Technology Stocks : RealNetworks (NASDAQ:RNWK) -- Ignore unavailable to you. Want to Upgrade?

To: Robert Rose who wrote (3356)	5/25/1999 9:05:00 AM
From: Mark Otto	Read Replies (1) \| Respond to of 5843

This morning's Briefing...note RealNetworks references... The bad side... >>Forces Driving Retreat End of Earnings Season: As suggested above, Net stocks typically rally into earnings season only to succumb to profit-taking on the news. The earnings vaccum is certainly a contributing factor behind the current retreat. Reality Bites: In sector's early days investors saw no boundaries to the potential profits that Net companies could make... But as this earnings season unfolded, and a number of companies provided disappointing results (either by missing their numbers of not exceeding them by a wide enough margin), investment community began to realize that not all companies enjoy limitless earnings potential... In fact, many may never make a profit. Rising Long-term Rates: Rising rates make investors nervous, and one way to calm those nerves is to bank profits... Higher rates also means investors are willing ot pay less of a premium for future earnings... in other words, values get compressed... Not a good thing for the admittedly overvalued Net sector. Overbought Technicals: Early year advance left many issues trading well above their long-term moving averages, a condition which often presages a correction... This was especially true for group leaders such as America Online (AOL), Amazon (AMZN), CMGI (CMGI), RealNetworks (RNWK), DoubleClick (DCLK), etc. Increased Supply: Probably the biggest factor weighing on the group is the flood of initial and secondary offerings, as added supply brings supply/demand equation closer to balance. Intense demand and limited supply was the key behind the sectors amazing gains over past couple of years... But as this equation moves closer to balance, investors will need to be more discerning in the Net stocks they own going forward as there won't be enough action to lift all boats higher. << and the good side... >>Will Net Sector Rise Again? The short answer is yes. Briefing.com expects the group to start heading higher in early June as traders begin to bid Net stocks up in anticipation of yet another strong quarter of revenue/earnings growth. But with each such advance participation should narrow, as investors become ever more demanding of performance. Just having a ".com" in the name will no longer be enough to sustain a stock. The company will need to show some combination of the following: proprietary technology, high barriers to entry, good management and/or strong brand identity. As for valuations, it is still too early to apply traditional measures, but as the industry matures and more stock becomes available don't expect a return to the absolutely insane levels of the past. Continued consolidation will also help reignite the group. As more and more second and third tier companies struggle to add customers and grow their revenues/earnings at an acceptable pace, they will seek out larger partners. In addition, many of the larger companies in order to remain ahead of the curve will want to add eyeballs. These forces will collide with a wave of merger activity being the outcome. Net-mania may indeed be over, but Net outperformance is not. Briefing.com contends that aggressive growth investors, with a high tolerance for risk, should begin to snap up bargains among the group leaders such as Exodus (EXDS 76), Yahoo! (YHOO 137 7/8), America Online (AOL 119 7/16), RealNetworks (RNWK 71 3/4), E*Trade (EGRP 50), Net.B@nk (NTBK 41 3/8), InfoSpace (INSP 49), Inktomi (INKT 103 5/16), Amazon (AMZN 117 1/2), CNet (CNET 115 1/16), USWeb/CKS (USWB 26 1/4) and eBay (EBAY 183 1/4).<<