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After Beating Street Estimates, eBay Can't Keep Declines at Bay

Analysts at Deutsche Banc Alex. Brown lowered eBay's third-quarter earnings but raised its revenue forecast.

SAN FRANCISCO -- Internet stocks took off to a mostly positive start, though Monday's selloff still appeared to be fresh in investors' minds. Internet Sector

index was recently trading up 12.79, or 2.3%, at 577.31, but that already was off a session high of 584.62 made soon after the opening.


(EBAY) - Get eBay Inc. Report

was among the most active Net stocks after reporting second-quarter earnings last night that were roughly in line with estimates. It was trading down 2 1/8, or 2%, at 102 1/4 after trading as high as 107 15/16 in the first few minutes of trading.

eBay reported pro forma earnings of 4 cents a share, a penny better than the

First Call

estimate, up from the year-ago 2 cents. Revenue of $38.2 million came in near expectations, but far above the $8.9 million from the year-ago second quarter. Analysts at

Deutsche Banc Alex. Brown

wrote that eBay could trade lower over the next several sessions, but they see weakness as a buying opportunity. They reiterated a buy rating on the stock and a 12-month price target of 150.

Deutsche Banc, which has done underwriting for eBay, also lowered eBay's third-quarter earnings estimates to 13 cents a share from 23 cents, but raised its revenue forecast to $58 million from $49 million. Lowered earnings estimates reflect the integration of the

Butterfield & Butterfield


Kruse International

acquisitions, along with expectations for increased marketing and infrastructure costs.

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Analysts also said eBay's well-publicized technical

problems are likely behind it and did not appear to have a lasting impact.

Morgan Stanley Dean Witter

analyst Mary Meeker noted that the 1.8 million increase in registered users from the first to second quarters was as large as the increase for all of 1998.

America Online


was blamed for much of Monday's weakness in the Net sector for several reasons, including the block sale of 4 million shares by company executives. But it was recovering early today, up 1 1/2, or 1.5%, at 101 5/8.

Phil Leigh, Internet analyst with

Raymond James

, said he was not "overly concerned" about the drop in the stock, saying the insider selling reflected a "backlog of intended sales over the past eight months as the top management was not permitted to sell until after the quarter in which


was formally acquired got reported."

Leigh also addressed the attempts by AOL to block


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users from exchanging instant messages with AOL's users. Leigh wrote that he thinks AOL is "dealing from a position of strength" and would likely attempt to negotiate an appropriate agreement. Yahoo! was up 2 11/16, or 2%, at 137 in recent trading. Microsoft was up 1 7/8, or 2%, at 89 1/2.

And in other AOL-related news, San Francisco's board of supervisors voted Monday not to force


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to immediately open its cable network to competing Internet providers such as AOL. The board will consider the issue again in December and monitor developments in other cities considering similar measures. AT&T has a major stake in


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and is expected to give the firm favored distribution on the cable networks it controls. Excite@Home was up 2 3/8, or 5%, at 48 9/16. AT&T was up 1/2, or 1%, at 55 3/8.

Among the top gainers early on was

Cheap Tickets


after the online airline ticket seller bested earnings estimates. Cheap Tickets was up 4 15/16, or 12%, at 45. It reported earnings of 15 cents a share for its second quarter, nearly double the First Call estimate of 8 cents and five times the year-ago 3 cents. Revenue of $102.6 million was more than double the $48.2 million reported in the previous year. The company said Internet sales represented 28% of gross bookings.

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