Amazon's Bellwether Status Tarnished as Net Sector Shrugs Off Downgrades

Amazon's woes pulled it down 6.5%, but that didn't hold back the Net sector. The DOT index finished up 1.9%.
Publish date:

Investors went shopping for Internet stocks today. But they weren't buying much (AMZN) - Get Report, which suffered from ongoing concern over when the premier online retailer would turn a profit.

Amazon closed down 4 15/16, or 6.5%, at 71, though that was far from the session low of 65 7/8. Following its third-quarter

results Wednesday night, Amazon was

downgraded by three research firms,

Merrill Lynch


Prudential Securities


CIBC World Markets

, all of which expressed disappointment that Amazon was not making enough progress toward earning a profit.

The company indicated that marketing expenses would rise to roughly $100 million in the fourth quarter vs. around $33 million in the third quarter. Both


James Cramer and

Herb Greenberg took shots at Amazon in earlier columns.

Not all the research was negative.

Donaldson Lufkin & Jenrette

reiterated a top pick rating and a 6- to 12-month target price of 140, while also stating the stock should be a core Internet holding. "In our view it's crazy to get off this train heading into the holiday shopping season," wrote analyst Jamie Kiggen. "Do you really want to bet against Amazon as they make a massive bet on Q4? We don't. And more evidence of Amazon's model should become apparent as year 2000 unfolds."

While shock waves from Amazon's woes reverberated through the Internet sector, they did not lead to a sharp selloff in Net stocks. Positive economic

news that led the

Dow Jones Industrial Average

to a 227-point gain and the

Nasdaq Composite Index

to a 72-point gain also supported Net stocks. Internet Sector

index closed up 13.33, or 1.9%, at 719.82.

Not all the post-earnings news was disappointing.

Network Solutions


closed up 8 1/4, or 8.8%, at 102 1/4 after besting earnings estimates this morning. Third-quarter earnings of 21 cents were better than market estimates of an 18-cent gain. Network Solutions said it registered a record 1.3 million new domain names in the quarter, up 160% from the 507,000 registered in the third quarter of 1998 and up 12% from the 1.2 million registered in the second quarter of this year.

Among other winners,


closed up 8 5/16, or 20%, at 49 13/16 after the online digital music provider said it would do cross-promotional work with

to increase traffic between the two sites.


America Online


closed up 2 3/4, or 2.3%, at 122 3/8. Shareholders voted to approve a proposal to expand the number of common shares outstanding to 6 billion amid investor demand for the company to split its stock for the seventh time.




closed up 7 1/16, or 25%, at 35 9/16. The company publicized that it ranked 15th among shopping Web sites in the latest

Media Metrix

survey and was ranked one of the top 10 of the 50 fastest-growing Internet companies by

Worth Magazine

. Though uBid did improve from 19th to 15th in the Media Metrix rankings for September (excluding the AOL

Shopping Channel

), its reach actually fell to 2 million unique visitors in September versus 2.3 million in August and 2.5 million in July, according to Media Metrix.