Christmas is coming and the e-commerce stocks are getting phat. If last year was the first e-Christmas, many analysts are predicting that this year will be, well, more. And that has given momentum to many an Internet stock in the last few weeks.
Money managers are piling on.
TheStreet.com E-Commerce Index
, a basket of 15 prominent e-commerce stocks, has jumped 28% in just two weeks as e-commerce seduces short- and long-term investors and traders alike. Short-term investors trade into these stocks, ahead of the e-Christmas stories sure to flood the
of the world. And long-term investors see this holiday season as a potential watershed for e-commerce.
has been a beneficiary of this trend, on the simple logic that Christmas equals toys. And to be sure, if eToys doesn't work during the holiday season, the stock will end up on Wall Street's permanent blacklist.
The other winner this Christmas, already, has been e-commerce king
. "Amazon is really taking the lead in retail online buying," says Cameron Meierhoefer, Internet research analyst for
PC Data Online
. "They have the size, they have the leadership, they have the base -- Amazon.com is dwarfing their competition." In a PC Data study released last week, Meierhoefer found that Amazon.com had twice the retail sales of
, the No. 2 online seller in September. To many simplistic investors, the logic stops there: Amazon sales equals rising share price.
But many on Wall Street worry that Amazon has already achieved "victory valuation." In other words, the company will have to achieve victory in every single category it enters to support its
stock price. "They may be spreading themselves too thin," muses Nick Moore, a technology analyst with
Jurika & Voyles
, who has no position in Amazon.com. "They have a lot of 'release 1.0' products to support for such a young company, not to mention their logistics initiatives. zShops is definitely a great move -- that's a frictionless product and they are sort of first. But consumer electronics injects some risk, since that sector is heavily populated on the Web with negative-gross-margin participants."
That concern has money managers looking for other holiday trends. Chief among them: consolidators.
are expected to see significant revenue growth from Christmas and yet are often overlooked by e-commerce investors. "During the 1998 holiday shopping season, AOL members spent $1.2 billion,"
BancBoston Robertson Stephens
analyst Keith Benjamin wrote in a recent report. "In the month of March, members spent $727 million ... Could Christmas 1999 be $10 billion?" His firm hasn't done recent AOL underwriting.
Another stock that's drawing interest is
, currently in the middle of a $100 million multimedia advertising campaign. "The CNet model is the right model -- to sell nothing," says
Deutsche Banc Alex. Brown
analyst Larry Marcus. "None of that messy pricing, inventory fulfillment, customer support ... that's not very 'e' to me. CNet is the next cut of sophistication -- the tools and the information so consumers can make the right decisions."
But understand how this works. Every sales guy on Wall Street is calling up his clients, pitching the Net stock story. Marcus' call is free from underwriting bias, but you better believe that every analyst is insisting that the company his firm underwrote is the clear winner this holiday season. And every dumb daytrader is sitting at home watching e-tailing ads on the tube and loading up on Amazon.com.
"I've been hearing a lot of that: Last year the stocks got a pop, so now's the time to get in," says
Choice Investment Management's
Patrick Adams, the former manager of the massive
Berger 100 fund. "But that's not really a call on the fundamentals of the business -- it's a trading call."
And that's where the old Wall Street axioms come in. Three to keep in mind:
In the short term, the right trade wins.
In the long term, we're all dead.