Net Stocks Leading the Way Down

The geyser of IPOs plus profit-taking adds to the bite.
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SAN FRANCISCO - With the Nasdaq Composite down 2%, the TheStreet.com Internet Sector index down 5.6% and the Dow down 1.1%, the general tone of the market is weak. And Internet stocks are going to be hurt more than others, said Dan Mathisson, head stock trader with D.E. Shaw Securities.

First off, in this sector traders are quicker to take profits after huge run-ups. Even though

Amazon.com

(AMZN) - Get Report

is down more than 90 points from its 52-week high of 221 1/4 made on April 27, he noted, it is still trading higher than where it began the year at 107 3/32. Amazon.com was down 6 11/16, or 5%, at 121 7/8 around midsession.

"These things have done so phenomenally well that once they start going down, people are quick to take profits," he said.

Mathisson also named the glut of IPOs as a huge factor in the selloff. He said that there are so many Internet IPOs that there is not enough "new money" to go around. Investors are not selling "

Disney

(DIS) - Get Report

and

Nike

(NKE) - Get Report

to buy new Internet IPOs," he said. They're selling

Yahoo!

(YHOO)

, Amazon.com and other Net stocks. And just as quickly, investors are getting out of one IPO and into the next.

But, he cautioned, that might not be happening with one of this week's Internet IPOs,

barnesandnnoble.com

(BNBN:Nasdaq). There has not been much respect for parent company

Barnes & Noble

(BKS) - Get Report

in recent years, he said, and that could extend to teh IPO. However, there was news today that lead underwriter

Goldman Sachs

had raised the price range on barnesandnoble.com's IPO to $16 to $18 from $11 to $13, indicating good interest.

Currently, the big Internet names are among the big losers.

CMGI

(CMGI)

was off 16 15/16, or 7%, at 215 7/16. Yahoo! was down 10 3/8, or 7%, at 140 15/16;

priceline.com

(PCLN)

was down 11 13/16, or 9%, at 127 1/8; and

@Home

(ATHM) - Get Report

was down 12 7/16, or 9%, at 117 9/16.

Bruce Smith, an Internet analyst with

Jefferies & Co.

, is blaming losses on last week's survey from

Media Metrix

that showed the total number of unique visitors on the Internet declined slightly in April from March levels. Smith said that actual usage is up from 5% to 10% a month and "shows no signs of slowing." Smith said he remains "extremely bullish" on the second quarter and expects the Internet sector to turn around in a week.

Internet stocks

Get out now.

Holding on.

Buying now.

Have no clue.