Net Stocks Push Nasdaq Lower With Late-Day Selloff
SAN FRANCISCO -- It's too bad that Alan Greenspan and Bob Rubin didn't misread the topic for their testimony to the House Banking Committee earlier today. We would rather have heard them talk about Internet finance issues rather than the international finance issues they attacked with vigor.
The point is that there now is a lack of news in a sector that is in constant need of good news to keep investors encouraged about paying outrageous sums of money for companies that have out-of-this-world valuations and may not produce profits until well into the next millennium. Internet stocks were mostly weaker today, and the sector appears to be lacking a focus -- but that could change quickly.
Bruce Smith, Internet analyst with
Jefferies
said he's telling people "they should be buying now," in advance of what should be a strong seasonal period for Net stocks. Having studied an index of Internet stocks over the past 13 months, he's determined that the third month of every quarter is a big one for Internet stocks and that June should follow that pattern.
It should be noted, though, that Smith uses mainly the biggest and most successful of the Internet companies, including
America Online
(AOL)
,
Yahoo!
(YHOO)
and
@Home
(ATHM) - Get Autohome Inc. American Depositary Shares each representing four class A. Report
, though some of the smaller Net companies like
Egghead.com
TheStreet Recommends
(EGGS)
and
Onsale
(ONSL)
also are included.
Smith said you will begin to hear talk about second-quarter earnings in June, and he is looking for strong numbers that have the potential to be "blowout numbers." In addition, he said there are a number of technology conferences scheduled for June that will provide a steady news flow. Smith also said he is not overly concerned with valuations, explaining that during the "hypergrowth phase" that Internet stocks are going through, "looking at valuations tends to be wrong."
Today's Movers
Late selling among Internet stocks put a hurt on the
Nasdaq
, which ended the day 35 points lower.
Losses came despite a strong performance by
eToys
(ETYS:Nasdaq), the Web-based retailer of children's products. The stock soared on its first day of trading, closing up 56 9/16, or 283%, at 76 9/16.
Shares of
CNet
(CNET) - Get ZW Data Action Technologies Inc. Report
rallied on news that the company would be added to the
Nasdaq 100
index at the close of trading May 24. CNet will replace
McCormick
(MCCRK)
, which is delisting from the index. It closed up 6 1/16, or 5%, at 125 3/4, though that was off the session high of 137.
America Online was unable to hold gains made early on following its meeting with investors and analysts on Wednesday, as traders bought the rumor and sold the fact. It closed down 5 7/16, or 4%, at 129 1/16 after reaching a high of 137 15/16 earlier in the session. The stock's inability to maintain momentum contributed to weakness among Internet stocks.
Not helping the slide was
Amazon.com
(AMZN) - Get Amazon.com Inc. Report
, which slipped on news that the company filed a $2 billion shelf offering, with the proceeds to be used for expansion. Amazon.com closed down 8 3/4, or 6%, at 130 13/16.
Also on the downside was
Etec Systems
(ETEC)
after the semiconductor equipment maker missed third-quarter earnings estimates by a penny on Wednesday and warned of losses in the fourth and first quarters.
Credit Suisse First Boston
downgraded the stock to hold from buy. It closed down 5 5/8, or 16%, at 30 3/8.
On the upside were a couple of companies that make data-storage products. Computer networking equipment and software maker
Emulex
(EMLX)
soared more than 20% today after the company sold 2.1 million additional shares to the public at 61. It closed up 12 1/4, or 19%, at 75 1/2, though that was off a session high of 81 3/4.
Following Emulex was
QLogic
(QLGC)
, which makes chips that allow disk drives, CD-ROMs and computers to communicate with each other. The stock has been on a tear since reporting record earnings earlier this month. It closed up 13 1/2, or 13%, at 116 7/8. Shares of the company were trading at 75 7/8 before it reported earnings on May 6.
Not on the Level
Shares of network chipmaker
Level One
(LEVL) - Get Level One Bancorp Inc. Report
dropped 3 3/16, or 6%, to 46 15/16 after Credit Suisse First Boston analyst Charles Glavin wrote that
Cisco
(CSCO) - Get Cisco Systems Inc. Report
would use
Broadcom's
undefined
quad and octel transciever chips when it upgrades its line of network switches later this year.
The loss of that business will cost Level One as much as 8% of its total revenue stream, Glavin told
TheStreet.com
. In contrast, Broadcom's Cisco revenue will likely increase from about $12 million to $20 million per quarter, Glavin said.
Glavin said the loss of the business could put at risk a pending acquisition of Level One by
Intel
(INTC) - Get Intel Corporation Report
, but he said that a halt to the plans was not likely.
Broadcom stock closed today up 13/32 to 99 7/8. It had previously risen 53% since reporting stellar first-quarter results April 20.
--
Marcy Burstiner
