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Web stocks whipsawed
Net bull Meeker sees potential for 20 percent slide
By Bambi Francisco, CBS MarketWatch
Last Update: 12:23 PM ET May 26, 1999 Internet Daily
Net Headlines
NEW YORK (CBS.MW) -- Internet stocks took investors on another roller coaster ride Wednesday, plunging early on negative comments from an influential Net analyst before recovering somewhat in recent trading.
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CBS MarketWatch Columns
Updated:
5/26/99 12:16:16 PM ET
The Goldman Sachs Internet Index rose 5.13 to 465.51 after falling as low as 430.77 earlier in the day. The index has lost about 18 percent, or $25 billion in stock value, in the past four sessions. The Amex Internet Index rose 2.96 to 282.43 in recent trading, after falling as low as 267.33 earlier.
Mary Meeker, Internet analyst at Morgan Stanley, well known for being the biggest Net fan, said the battered group could fall another 20 percent from current levels, according to money managers familiar with a conference call she placed this morning.
Meeker cited the recent flood of Internet deals as contributing to weakness in the sector and said valuations are still high, according to the money managers.
Supply call
Meeker said there were 14 Internet-related IPOs in '97, 26 in '98 and 43 so far this year with 63 scheduled to go public soon.
Meeker's comments come just two weeks after she raised her rating on America Online (AOL: news, msgs) to a "strong buy," leading some investors to question the basis of analysis.
BNBN
NASD
Last Chg.
25 11/16 +2 3/4
% Chg. Vol.
+11.99% 7,110,400
Day Lo. Day Hi.
23 3/4 26 1/4
Open Prev.
26 1/8 22 15/16
As of
May 26/99 1:09 pm ET
Last Trade
May 26/99 12:54 pm ET
15 MIN. DELAY
"Meeker's reputation is gold, but hopefully that kind of call shows capitulation on her part, given that she just gave a very positive [recommendation] on AOL," said Takeshi Kawamoto, at Nomura Asset Management. "I don't want to be critical but the supply argument is a little weak, for a 20 percent drop. That's a bit arbitrary." Kawamoto sees the recent slide as a buying opportunity.
"In order to keep up with these stocks the analysts have had to become momentum oriented," said Roy Howard of Circle T, a hedge fund. "Because those are the investors that are playing in these stocks -- you have to cater to your audience."
Shares of America Online fell 1 1/4, or 1.1 percent to 113 3/4. If Meeker's gloomy forecast plays out, AOL could conceivably drop to 92. Yahoo (YHOO: news, msgs) rose 2 7/16 to 129 3/8, after falling as much as 3 percent earlier. Amazon.com (AMZN: news, msgs) rose 15/16 to 112 1/2, after sliding about 4 percent earlier. EBay (EBAY: news, msgs) halved an earlier slide, losing 5 3/16, or 3.2 percent, to 158 3/4.
But Meeker isn't alone in her bearish views. Fund managers are keeping to the sidelines.
"I don't know where the bottom is," said Brian Hayward, portfolio manager of Invescom Worldwide Communications Fund.
"I still see them moving down and I can't risk," buying certain Net names for fear "I might see redemptions in my fund in the near-term."
"I don't think we're at the bottom for Internet stocks," said Peter Cohen, author of Net Profit. "If growth of the Internet really slows down, then Internet companies are just small and unprofitable cash sinks."
Among other Net stocks, DoubleClick (DCLK: news, msgs) fell 3 7/8 to 81 3/4; CMGI (CMGI: news, msgs) lost 9 1/8 to 182 3/8; CNet (CNET: news, msgs) fell 5 1/2 to 92.
But there were some winners. At Home (ATHM: news, msgs) rose 2 5/8 to 115 7/16 while its merger partner Excite (XCIT: news, msgs) rose 2 13/16 to 119 3/4. Inktomi (INKT: news, msgs) rose 5 to 91.
MindSpring (MSPG: news, msgs) jumped 1 1/2 to 70 1/2 after the Internet services provider announced a 2-for-1 stock split, effective June 25.
Bambi Francisco is Internet editor of CBS MarketWatch. She talks stocks and Internet on AOL's MarketTalk, hosted by Sage Online.
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