The sun came out for several Internet stocks Monday, as a series of analysts' notes and company announcements warmed investors up to the beaten-down sector. Big names such as
moved higher as analysts forecast improving fortunes for the top-tier players, but the overall performance within the group was mixed while profit concerns continue to arise and skepticism remains about the prospects for making money on the Internet.
TheStreet.com Internet Index
, or the DOT, tracks the performance of 24 Internet stocks, and the measure lately gained 0.6% after being lower for most of the morning. Yahoo! climbed 1.6% to $19.77 in the wake of
upgrade of the company's stock to neutral from sell. Cowen analyst Scott Reamer said he sees evidence that last summer's "free fall" in Web advertising is over. Yahoo!'s shares, which are well off their 52-week-high of $150 and down 35% for the year to date, could very well break out of the trading range of $17 and $22, Reamer wrote in a research note.
Investors were also cheering for online ad firm
, which lately gained 6.1% to $14.73 on the
Nasdaq. The company disclosed last Friday that it agreed to buy
for $41 million in a bid to expand its email marketing presence.
analyst Lowell Singer wrote this morning that he believes the acquisition will bolster the company's offerings with a larger client base and proven technology. Nevertheless, the analyst cautioned that online ad spending may not rebound in 2001. "We believe that it may be some time before there is a catalyst to drive the stock beyond the mid-teens," Singer wrote, before adding that "we encourage investors to continue to take advantage of short-term trading opportunities in DoubleClick."
Some observers reserve skepticism for the sector. "Our view is still fairly negative, as I think the whole Internet model is still evolving," said Brett Gallagher, vice president of
Julius Baer Investment Management
, a firm that provides asset management and investment advisory services, as well as trading in securities and foreign exchange. Gallagher said he doesn't hold any Internet stocks and sees "more promise" for companies that provide the infrastructure for the Web rather than those trying to profit from online commerce.
"We've had a washout, but it's still yet to be proven to me that the remaining names have a model that's going to work," he said. "People are still trying to figure out how to make money in Internet-based names. And I'm skeptical in general about any analysts' recommendations."
That said, Anthony Noto of
this morning initiated coverage of
with a buy rating. Noto, who has a $19 price target on the Internet service provider, said he believes EarthLink's $2 price increase to its basic service by the beginning of 2002 could boost the company's cash flow to $95 million, up from $25 million without the increase. This, "combined with steady progress towards positive EBITDA (earnings before interest, taxes, depreciation and amortization), will serve as catalysts for the shares," Noto wrote in a research note. Shares of EarthLink, which have recovered from a 52-week low of $4.75, lately gained 4.7% to $13.90.
And online auctioneer eBay got a lift after a analyst Derek Brown at
raised his price target on the stock to $75 from $60. Brown cited "confidence in the company's operating fundamentals, market position and expansion opportunities." Brown, who reiterated his strong buy rating on eBay, said he believes the company is on track to meet or exceed his top- and bottom-line forecasts for the second quarter. Shares of eBay, which were lower in the morning, recently gained 2.2% to $62.60.
Meanwhile, Amazon.com was inching higher ahead of its meeting with analysts tomorrow. Analyst Jeffrey Fieler at
raised his second-quarter and full-year bottom line estimates for Amazon. The analyst now expects the online retailer to lose 21 cents in the quarter, narrower than his previous forecast of a loss of 23 cents. For the year, he expects Amazon to lose 69 cents, rather than the prior projection of 73 cents, citing the company's revenue strength and "operational efficiencies." Fieler also maintained his attractive rating on the stock.
Lauren Cooks, an analyst at Robertson Stephens, said she expects an "upbeat analyst day" for Amazon tomorrow. Cooks maintained her market perform rating and $11 to $14 price target on Amazon. The company's shares lately gained 0.5% to $17.02 on the Nasdaq.
Two Internet-related stocks recorded impressive gains on news they were being acquired. Online direct marketer
surged 59% to $2.55 after
, the Internet investment wing of airline holding company
, said it would acquire the company for $2.60 a share. Shares of
jumped 74% to $3.39 after the company agreed to be acquired by an affiliate of its largest shareholder,
, a private equity investment firm, for $3.50 a share.
Still, despite the strength in some of the well-known Internet players, others in the DOT were weaker. Shares of
AOL Time Warner
were recently off 1.7% to $51.83, while
lost 0.1% to $10.07.
dropped 0.8% to $7.94.
George Gilbert, co-manager of the
Northern Technology Fund, said "it probably makes a lot of sense to continue to question the fundamentals" of some Internet stocks. "
But you have to step back and realize that the factors that play to the different companies are different, and because of that you can have an eBay succeeding while an Amazon may not be," he said. "If there was a message for the investor, it's that this is not a homogeneous sector."