Amazon Plunges After Analyst's Comments

Analyst Henry Blodget may now be forever linked with the online retailer.
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Michael Jordan

and the

Bulls

or

John Elway

and the

Broncos

,

CIBC Oppenheimer

analyst Henry Blodget might forever be linked with

Amazon.com

(AMZN) - Get Report

.

Shares of Amazon dropped sharply today after the now-infamous Blodget said he was not "comfortable" raising his target price for the stock. Amazon was trading 18 3/4 lower at 121. It has fallen steadily since reaching an all-time high of 199 1/8 on Jan. 8.

In a research report, Blodget said the stock had passed his 133 target and that the recent trend of Internet retailers selling products at wholesale prices could curb investor enthusiasm on the companies and indirectly hurt Amazon's stock, even though it does not impact Amazon's fundamentals. On Tuesday,

OnSale

(ONSL)

announced that it would be selling products at cost and earning revenue through advertising, a selling strategy also being practiced at

Buy.com

.

In his research report, Blodget said the most prevalent investor concern about Amazon.com "is that it operates in a brutally competitive, low-margin commodity business, and we believe, therefore, that a proliferation of the 'at cost' strategy could scare the bejeesus out of investors and weaken the stock."

Blodget was not available for comment. The analyst grabbed headlines when he set a target of 400 for Amazon.com in December of last year, a price the stock hit earlier this month when taking into account the company's 3-for-1 split.

Blodget said CIBC Oppenheimer would maintain a "small position" in the stock ahead of its earnings report Jan. 26 and monitor the success of the "at cost" strategy of OnSale and Buy.com. CIBC Oppenheimer did not serve as an underwriter for Amazon.com.

Analysts Raise Microsoft Target

Microsoft

(MSFT) - Get Report

shares soared in heavy volume to a record high after the Redmond, Wash., software giant reported earnings after the close that beat Wall Street's expectations by 14 cents, prompting several analysts to raise their price targets and estimates for coming quarters.

Donaldson Lufkin & Jenrette

,

Salomon Smith Barney

and

PaineWebber

all raised their price targets to 200. DLJ raised its fiscal year 1999 estimate to $2.58 from $2.35 and its fiscal year 2000 estimate to $3.00 from $2.70.

Salomon analyst Neil Herman was slightly more bullish, raising his fiscal year 1999 estimate to $2.59 and to $3.05 for fiscal year 2000. He wrote in a research note that "we don't buy management's conservatism about the business outlook, particularly anecdotal evidence on Y2K."

In a conference call to investors, Microsoft Chief Financial Officer Greg Maffei said he remained guarded on the company's outlook, mostly due to worldwide economic jitters and fears that companies will slow spending on new software to focus on fixing year 2000 bugs.

PaineWebber raised its 1999 estimate to $2.56 from $2.37 and 2000 estimates to $3.13 from $2.90.

Microsoft shares recently traded up 10 3/16, or 6.5%, at 165 7/8. That was just off its daily and all-time high of 167 7/8, hit earlier today.

Preannouncement from Baan

Shares of Dutch enterprise software maker

Baan

(BAANF)

dipped after it preannounced disappointing fourth-quarter earnings.

The company said it expected to report revenue near $142 million and a net loss of $250 million, or a loss of $1.22 per share.

First Call's

consensus estimate from 22 brokers had predicted a 7-cent loss per share in the December quarter.

It said nonrecurring charges for restructuring activities previously announced will account for about $160 million of the quarterly loss. The restructuring charge is larger than the $110 million Baan had predicted when it reported its third-quarter figures in October.

Baan also said it expected deferred revenue to rise by about $55 million to $162 million in the fourth quarter, which was seen as a more conservative way to recognize revenue -- a positive sign after past accusations of aggressive accounting practices.

But overall, bad news was still seen in Baan's balance sheet. Salomon Smith Barney analyst Neil Herman maintained his underperform rating and said he believes that Baan burned through a lot of cash during the quarter. "We believe the company ate about $90 million in cash in the quarter," he said. "Cash balances fell from $221 million to $206 million despite a cash infusion from a third party of $75 million." His firm has not underwritten for Baan.

He also said, "Excluding the impact of revenue reversals, we estimate that license revenue declined about 50% year over year to $70 million and about 20% sequentially. ... The tunnel may be long before the light."

Baan shares last traded down 7/8, or 7.8%, to 10 3/8.

Cooling Off

The euphoria has worn off of Tuesday's hot merger of

@Home

(ATHM) - Get Report

and

Excite

(XCIT)

. Excite was down 9 13/16 midday at 100 1/16 after Tuesday's 42 1/2-point gain. @Home was down 4 3/4 at 110 7/8 after gaining 13 3/8 points Tuesday.

Also running out of steam is

MarketWatch

(MKTW)

, which was down 17 7/8 to 78 1/4. The stock raced to a high of 130 when it began trading last Friday, but has since given back a good chunk of that move.

-- Staff reporter Medora Lee contributed to this article.