It was supposed to be a harsh winter for many of the Internet stocks. Instead, it's been pretty darn sunny for many of the bigger names. TheStreet.com's Internet Index, known as the
DOT because it tracks dot-coms, is up 38% for the month.
The Federal Reserve's
expected interest rate cut is bringing some glass-half-full optimism about the Internet, as are some good rumors and nuggets of news. Plus, there may just be a touch of pessimism fatigue -- the belief that all the bad news has got to be out there and priced into stocks. (Check out
TheStreet.com's Dave Gaffen's
preview of what Fed head Alan Greenspan's
upcoming speech tomorrow to the
Senate Budget Committee may hold.)
Not everyone is convinced there's reason for such optimism. Internet analyst Andrea Rice-Williams of
Deutsche Banc, for one, says that given the tough years some dot-coms have ahead of them, "It's questionable whether it's warranted."
Still, "There are a lot of people out there with a lot of cash and not a lot of great names to put it in," said
Bear Stearns analyst Jeff Fieler. So it's not surprising that the cash has been going to some of the best-known names.
The DOT has ridden this wave of investor sentiment well. The index closed at 273.78 on Jan. 2. But it's risen 54% since then.
There are a few, but only a few, well-known names on the DOT that haven't done well with it. Only two of the 24 stocks on the index are down for the month. But they are pretty well-known names:
Ariba (ARBA Quote - Cramer on ARBA - Stock Picks) and
Macromedia (MACR Quote - Cramer on MACR - Stock Picks). Today was also a downer for both with Ariba ending down 92 cents, or 2.2%, to $40.88, while Macromedia was off 48 cents, or 1.4%, to $33.81.
It's been a very mild January indeed for newly merged media giant
AOL Time Warner (AOL Quote - Cramer on AOL - Stock Picks),
eBay (EBAY Quote - Cramer on EBAY - Stock Picks), e-tailer
Amazon (AMZN Quote - Cramer on AMZN - Stock Picks),
DoubleClick (DCLK Quote - Cramer on DCLK - Stock Picks) and uberportal
Yahoo! (YHOO Quote - Cramer on YHOO - Stock Picks).
AOL Time Warner isn't just coasting on the good feelings from its merger early this month. It's already moving to protect the performance numbers that company officials restated about the time of the merger.
The layoffs that were reported today are part of that.
Merrill Lynch analyst
Henry Blodget wrote in a research note today that the layoffs were "the typical pruning of the weakest performers, rather than major cost-cutting." Overall, Blodgett wrote, AOL has moved aggressively in a number of ways to push the merger forward and keep the company's performance high. (Merrill has done recent underwriting for AOL.)
Another plus for the new company: It announced it will buy back 2.2% of its existing shares. AOL Time Warner closed up $1.60, or 2.9%, to $55.75.
When it comes to Amazon's most recent earnings announcement, "A lot of people were betting that the numbers would be a disaster," Fieler said. They weren't, although they only just passed the low edge of estimates. Amazon rose afterward and is now up nearly 36% for the month. In trading today it finished up $2.92, or 15.4%, to $21.88.
Yahoo!, too, made a January announcement that wasn't especially positive. In its Jan. 10 report, the company met earnings expectations for the fourth quarter, but guided down revenue expectations for subsequent quarters because of shriveling ad sales. Yahoo! took only a one-day hit and then climbed steadily. A week ago, it bounced on rumors it was a takeover target of entertainment giant
Viacom (VIA Quote - Cramer on VIA - Stock Picks). It's now 35.6% higher for the month. At the close of trading today, Yahoo! was up $3.92, or 10.1%, to $42.88.
Yahoo's rise is a bit of a mystery. It's still the prototype portal, of course. And it is beginning to pay attention to critics who see its advertising-dependent business model as a serious drawback.
In the past two weeks, Yahoo! has shown it is looking beyond the banner ad, announcing a deal with
Compaq Computer (CPQ Quote - Cramer on CPQ - Stock Picks) and trumpeting the new customers it has signed up for its corporate portal program.
To be sure, Yahoo! And many of the Internet names have been battered, bruised and left gasping for air as investors have pounded them with each new round of deflated expectations. And with an economic slowdown at hand, the golden question is when will growth be rekindled for both the economy and Internet companies' prospects. Obviously, investors have seen what they consider to be some good buys on the dot-com landscape.
Says Rice-Williams, "Once again, we have Yahoo! at a high valuation. Is that merited, given the transition year they have ahead of them?" Given Yahoo!'s price-to-earnings
ratio near 81, that's a great question.
John Raess
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