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One Fine Day
. It's Friday and it's been a rough week, so the focus of this story is going to be on a couple of stocks that got beat up today.
ended the day down 90.7, or 2.2%, at 4094.45. For the week, the index dropped around 150 points.
TheStreet.com Internet Sector
index finished down 36.43, or 4.2%, to 828.72. A couple of earnings warnings from
encouraged traders to take profits from yesterday's rally, while there also was concern about earnings from some other companies in the Internet sector.
Among the day's worst performers was
, which closed down 6 7/16, or 31.6%, at 13 15/16 and contributed to weakness throughout the business-to-business sector.
wrote about the firm's company's miserable performance in two stories that ran just after its quarterly report last
night and after the stock fell apart this
Ventro was downgraded by no less than six of the 10 research firms that follow the stock, in part because Ventro's revenue from transaction fees fell some 30% short of estimates. It did manage to best loss estimates by 6 cents (74-cent loss vs. 80-cent loss forecast), but investors looked past headline numbers to focus on the nitty gritty.
Ventro's decline was matched by a couple of other stocks that also reported earnings last night.
finished down 29 11/16, or 27.3%, at 79 1/16, while
tumbled 31 5/16, or 34.7%, to 59 1/16.
We only found one downgrade of Macromedia and it likely contributed to the stock's selloff, but was not the sole contributor.
U.S. Bancorp Piper Jaffray
downgraded the Web page software maker to buy from strong buy. Analysts noted that the company's revenue of $94.8 million for its fiscal first quarter was below their estimate of $96.9 million and that the company was heading into a "seasonally weak period with fewer product introductions."
According to an analyst at one research house who asked not to be identified, Macromedia is a momentum stock and even though the numbers were decent, the outlook into the next quarter shook out other traders.
"The stock has had a phenomenal run, and given several people's view of the September quarter as being seasonally weak, I think some people decided to back away from the story," the analyst said.
Greg Vogel, analyst with
Banc of America Securities
, noted that the stock had rallied 141% since April and "got a little bit ahead of itself." He said investors may have been concerned with the company's sequential revenue growth, which slipped to 6% this quarter after rising 39% in its fiscal fourth quarter, though revenue growth of 85% year over year was "still pretty good." He also noted that Macromedia came up a million dollars short of his revenue forecast of $95.8 million, which in today's environment is "enough to take the stock down 30%."
Vogel said once the stock started dropping, other investors begin to wonder whether someone might know something they didn't, so the selling intensified. And Vogel said while it may appear as though something is "horribly wrong with the company, that's not the case." He recommended aggressive buying in the stock on weakness in the 90 to 100 range, and actually increased his price target to 121 from 110. (Banc of America Securities has no underwriting relationship with Macromedia.)
Documentum also disappointed. The provider of information-management systems had earnings of 8 cents a share were better than the Street estimate of 6 cents a share, though the company apparently came up short in license revenue with $25.5 million. Analysts at
Credit Suisse First Boston
forecast license revenue at $26.6 million, while Banc of America Securities was even higher at $27.7 million. Credit Suisse First Boston analyst Brent Thill wrote that although he expected the stock to give up some of its recent momentum, its new product set "will fuel potential upside" in the second half of the year.
12:30 p.m. EDT: Solid Earnings News Just Not Cutting It for Tech Stocks
Let's see if we have this straight. When the market rallies into earnings numbers, it sells off afterward. If it sells off before earnings it rallies after. Therefore, if yesterday was an up day, today must be a down day.
A bit convoluted, but accurate enough. Technology shares were backpedaling early on despite mostly good news on the earnings front. The
Nasdaq was down 65, or 1.6%, to 4120 in recent trading.
TheStreet.com Internet Sector
index was getting slammed 40, or 4.6%, to 825.
was down 0.5% despite besting earnings estimates. The Internet service provider posted earnings of 13 cents a share for its fiscal fourth quarter, beating the 11-cent estimate. Losses most likely were due to profit-taking as the stock had pushed up about 18% since late June.
analyst Scott Reamer provides a pretty clear analysis of AOL's report. He maintains a strong buy on the stock, noting that even though the company missed his estimates in three of the four metrics he focuses on, improvement in gross margins was so strong that it allowed AOL to outperform on earnings per share expectations.
Reamer notes that subscriber growth of 992,000 customers was slightly below his 1.1 million estimate. He also points out that advertising/commerce revenue of $609 million (up 7% sequentially), was below his $620 million estimate. And sales and marketing expenses of $295 million were $17 million above his estimate. However, he notes that the above-mentioned gross margin of 53.8% was 2.3 percentage points better than his estimate due to an 8% drop in network costs vs. last quarter.
Admitting he has long been "unrepentantly bullish" on AOL's stock, Reamer claims that the combination of America Online and
(which AOL is buying) "is trading at a bargain basement price" and recommends the stock for long-term investors.
"We think all of the turmoil over the last few months only makes the visibility, scalability and franchise strength in AOL/TWX that much more valuable," Reamer writes. "That said, lots of the financial utopia that management describes remains on the come. And 'on the come' in a market like this doesn't generate a plethora of buy orders."
Elsewhere, shares of
were up 3.5%. The company bested earnings estimates with a 4-cent profit vs. the 2-cent Street estimate.
First Union Securities
initiated coverage of Inktomi with a hold rating. Analyst Christopher Russ indicated that the less-than-stellar rating was due primarily to valuation concerns, but also noted that Inktomi "continues to struggle with its shopping engine due to the current state of flux within the B2C e-commerce market." He notes that while shopping only accounts for a small portion of revenues (roughly 8%), "it artificially depresses the company's margins and profitability."
Turning back to the valuation, he notes that Inktomi is valued at 41 times his 2001 revenue estimate and more than 500 times his 2001 earnings estimate.
However, SG Cowen analyst Drew Brosseau reiterated a strong buy rating and a 200 price target on Inktomi, increasing his estimates due to "huge traffic server revenues." Brosseau says the stock "remains one of the most expensive stocks in our coverage group but is likely to go higher as estimates continue to rise."
were among the best performing on the Nasdaq, up 11.2%. The Internet telephony company reported a loss of 10 cents a share for its fourth quarter vs. the 19-cent loss estimate. SG Cowen increased its price target on the stock to 130 from 100. Analyst John Graves notes that active subscribers more than doubled from the previous quarter to 4.1 million, which was 30% ahead of his estimates and he forecast that it will double the number of active users over the next 12 months, with users in Japan and Asia contributing to the numbers.
The disaster of the day was
, down 28.5%. Our own Joe "B2B" Bousquin tipped off readers to the disappointing report in a
story that ran last night.
Though Ventro's 74-cent-a-share loss was 6 cents better than the Street forecast, Bousquin points out that the company missed on the crucial transaction fees analysts were eyeing. We found a couple of downgrades on the stock.
downgraded Ventro to long-term attractive from buy.
Also, First Union Securities slashed Ventro to hold from buy "based on declining gross profit dollars from transaction revenue and questionable adoption rates." Analyst Charles Wittmann writes that he did not feel that the stock's multiple (as of the close of trading last night) of 43 times 2001 gross profit was justified "given the lower than expected growth rate and peer group average multiple of 12x 2001 gross profit."
Among other companies that reported last night, shares of Web page software maker
were getting demolished, down 41 3/4, or 38.4%, to 67. The company's first-quarter earnings beat estimates, but revenue of $94.8 million was below the
U.S. Bancorp Piper Jaffray
estimate of $96.9 million. Piper Jaffray downgraded the stock to buy from strong buy as the company is heading into a "seasonally weak period with fewer product introductions."
Banc of America Securities
analyst Greg Vogel indicated that he expected the stock to be weaker due in part to a 141% run-up in the stock since mid-April. However, he recommends being "an aggressive buyer of the stock on weakness in the $90-$100 range (or 60x our 2001 calendar EPS forecast of $1.51)."
was off 6.4%. It reported a profit of 3 cents a share vs. the 1-cent estimate.
was up 8%;
was down 8.4%.