Internet stocks have shown signs of life over the past week, but were lacking one important component: follow-through. That was not a problem early today.
The Internet sector was mostly higher along with the broader market, though still not with much conviction, suggesting that gains were coming on short-covering rather than fresh buying.
TheStreet.com Internet Sector
index was up 5.5, or 1.1%, at 507.86.
Among the standouts early in the session was Wednesday's big winner,
, up 2 1/8, or 2%, at 94 1/2 following Wednesday's 7-point gain. AOL took off late Wednesday while
Morgan Stanley Dean Witter
hosted a conference call with AOL officials. After the call, analyst Mary Meeker wrote that officials "deftly handled" three concerns that have been hanging over the stock, including lack of broadband service options, potential price erosion due to the advent of "free" Internet access or bundled free PC/Internet access offerings and potentially aggressive price competition.
Regarding broadband, she noted that AOL is beginning beta tests of DSL offerings with its Bell partners this week, and more than 70% of AOL households are currently covered by DSL deals. Regarding free Internet access, she wrote that AOL believes that approximately 75% of its consumers are "brand-conscious" rather than value/price-oriented, and AOL is positioning its
service as its value offering. About competition, particularly from
, she wrote that AOL "believes its consumer-services orientation is stronger than that of any other Internet company." Morgan Stanley has been an underwriter for AOL.
Another research piece, this one from
, noted that recent weakness in AOL had already factored in "substantial subscriber pricing and competitive pressures," leaving the downside limited, but making the upside attractive. Goldman reiterated its recommended-list rating on the stock, saying that upcoming catalysts include a new AOL 5.0, the "You've Got Pictures" rollout with
and deployment of DSL broadband in partnership with
While gains in AOL helped carry Internet stocks higher Wednesday, the sector was still looking for leadership from other Net bellwethers. In early action,
was up 1 1/2, or 1%, at 129 9/16, though
was up 3 9/16, or 4%, at 91 1/4.
was up 7/16, or 0.5%, at 91 3/8. Amazon also was subject of a note from
Banc of America Securities
retail analyst Tom Courtney. Courtney said that with the stock down more than 60% from its high, "we can foresee a scenario where investors could double their money over the next three years based on relatively bullish sales and earnings assumptions." According to Courtney, to get such momentum in the stock, Amazon "would need to grow sales at 100% in each of the next three years with visibility of an operating margin in the 5% range, figures that we believe can be achieved."
Another big Net name,
, was down 1 5/8, or 2%, at 68 3/8. priceline said that it sold 1 million of its shares, and stockholders sold another 3.5 million shares in a secondary offering at $67 each. That was below the 5.5 million to 6 million shares the company was expected to sell. It also said it would not proceed with a sale of $250 million of convertible subordinated notes because of market conditions.