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.
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
preview of what Fed head
Alan Greenspan's upcoming speech tomorrow to the
Senate Budget Committee
Not everyone is convinced there's reason for such optimism. Internet analyst Andrea Rice-Williams of
Deutsche Banc Alex. Brown
, 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
analyst Jeff Fieler. So it's not surprising that the cash has been going to some of the best-known names.
It's been a very mild January indeed for newly merged media giant
AOL Time Warner
. When it comes to Amazon's most recent earnings announcement, for example, "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 recent trading it was gaining $2.17, or 11.5%, to $21.13.
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
. It's now 35.6% higher for the month. In recent trading today, Yahoo! was up $1.30, or 3.3%, to $40.25.
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.