Amazon Leads Net Sector to Greener Pastures
TheStreet.com Internet Sector
index was up 6, or 0.5%, at 1168.30 in early trading, after being lifted by deal announcements from
Amazon.com
(AMZN) - Get Report
.
Amazon said today that it would
up its stake in
drugstore.com
(DSCM)
to 28%. Under the agreement, drugstore.com will have a shopping tab at Amazon.com, with drugstore.com paying Amazon $105 million. Amazon also will make an additional $30 million investment in drugstore.com, bringing its total stake in drugstore.com to almost 28% of the outstanding drugstore.com common stock. Amazon was up 9 5/16, or 15%, at 71 3/8. drugstore.com also was benefiting from the news, up 4 3/4, or 16.3%, at 33 7/8.
Also, on Friday, Amazon said it was taking a 5% stake in
Greenlight.com
, an online car-buying company. Amazon will receive $82.5 million over five years and receive warrants to increase its stake to as much as 30% over five years.
Market analysts were jumping back on the Amazon bandwagon on the two deals.
Goldman Sachs
upped its rating on Amazon to trading buy from market outperform with a six-month price target of 95. Analyst Anthony Noto wrote that the deals Amazon has made with Greenlight and drugstore.com will help accelerate Amazon's "path to profitability." He indicated Amazon could achieve break-even status by 2001 if it has similar deals, which would be a year ahead of his forecast.
But Goldman's Noto hedged his position, writing that he was upgrading "despite countervailing issues/concerns." He wrote that the positive elements of the marketing deals would offset negative concerns over profitability. "Ultimately, we believe that the high margin revenue streams from marketing deals provide a greater positive catalyst than the likely near-term operational growing pains and recommend buying the stock at current price levels."
And
Salomon Smith Barney
analysts wrote today that Amazon's recent pullback represents a "compelling buying opportunity" and recommended purchase of the shares in front of the company's fourth-quarter earnings conference call Feb. 2. They noted that Amazon had declined 24% since Jan. 5, when the company pre-released fourth-quarter sales numbers, but indicated that earnings could come in below consensus estimates. "We believe that this negative earnings news has now been fully discounted in the stock price," the fourth quarter "represented the trough for losses," and the analysts didn't expect their 2000 operating loss estimate to be guided down from the current $1.08 a share. Salomon Smith Barney has done underwriting for Amazon.
A couple of Web-based music companies were moving in opposite directions.
Liquid Audio
(LQID)
was up 8 3/8, or 32.4%, at 34 1/4 on news that its song catalog would be available to
Microsoft
(MSFT) - Get Report
Windows-Media users.
MP3.com
(MPPP)
was not faring as well, down 2 1/4, or 7.6%, at 27 3/8. On Friday, the
Recording Industry Association of America
said it was suing MP3.com for copyright violations. The suit focuses on new technology by MP3 that allows users to listen to music from their CD collections from any computer. MP3 responded to the complaint, indicating that the service was "misunderstood" by the RIAA, and its
My.MP3.com
would "stimulate CD sales and expand the music industry overall."
