Net Stocks Continue to Suffer as More Traders Jump Ship
The end is near -- or the end is here?
Internet stocks continue to get punished as traders scramble to bail from the now out-of-favor sector. Comments this morning from both
Morgan Stanley Dean Witter's Barton Biggs
and
Prudential Securities' Ralph Acampora
have contributed to the selloff.
Biggs said there was reason to believe the Internet bubble was close to an end. Acampora recommended taking money out of Internet stocks and putting it into larger technology issues such as
Compaq
(CPQ)
,
Intel
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and
Dell
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. The declines have been steep.
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Yahoo!
(YHOO)
was recently off 28 7/16 at 258 3/4. It was as high as 445 on Jan 11.
Broadcast.com
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was off 14 1/2 at 105 1/2, while
eBay
was down 24 7/8 at 188 7/8. Acampora's picks are down as well, but not by too much. Dell was recently trading 7/8 lower at 84 7/16. Intel was 3 13/16 lower at 134 9/16, while Compaq was down 1/2 at 47 3/4.
With little history to draw from, analysts remain unclear how deep the correction will go.
"It could mean the parabolic move is over," said Jim Bianco of Bianco Research. "It could be a revaluation as to how to look at these stocks, or they could be in the midst of their big collapse."
Bianco said he doesn't see stocks like Amazon and Yahoo! recovering back to the highs anytime soon, though traders can still play the long side as the stocks remain volatile and capable of 20-point moves to the upside.
"They might be oversold and ready for a bounce," he said. "But the bigger picture is if the game is over, you don't want to be playing from the long side."
Carl Volk, senior portfolio manager for the
Munder Capital's
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Net Net fund, said investors still should wait for valuations to come back down before investing in the Net stocks. Volk said his fund is also subject to the ups and downs that the Net stocks are providing, though with more diversity, investors have more downside protection.
The declines have not been limited to the Internet stocks. Semiconductor stocks are weaker as well, with the
Philadelphia Semiconductor Index
off 3.5%.
Advanced Micro Devices
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was recently down 1 5/16, or 6%, to 20 11/16. And despite reporting positive earnings this morning,
Lucent
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was trading 8 1/8 lower at 107 3/8.
Compuware Rebounds
Shares of software maker
Compuware
(CPWR)
rebounded slightly today after
Goldman Sachs
analyst Rick Sherlund initiated coverage of the company on his firm's U.S. recommended list. He expects fiscal fourth-quarter 1999 earnings of 56 cents per share and has a fiscal 2000 estimate of $2.31.
He noted that the stock was off about 22% from its high of 79 3/16 on Dec. 31 and is selling at a 15% discount to his estimated 35% long-term growth rate and at 30 times his calendar 1999 earnings estimate of $2.08. He has a 12-month price target of 83.
Compuware fell steeply on Wednesday despite reporting better-than-expected earnings on Tuesday after the market closed because
Morgan Stanley Dean Witter
analyst Chuck Phillips downgraded the stock to outperform from strong buy. Compuware said on Tuesday it earned 49 cents per share, 4 cents better than
First Call's
consensus estimate.
Though Phillips raised his estimate for Compuware's fourth quarter ending March 31 by a penny to 58 cents per share and his fiscal 2000 estimate to $2.32 from $2.25, investors focused on the downgrade. Phillips wrote in a research note that he expected the company's license revenue growth and margins to drop to "more sustainable levels" over time. He also raised his 12-month price target for Compuware to 81 from 73.
Compuware shares were last up 2 1/16 to 64 7/16.
-- Medora Lee
