Since when is a 27% first-day gain in a stock cause for alarm? When it conflicts with the notion that Internet IPOs should at least double.

In the second-largest Internet IPO in history,

barnesandnoble.com

(BNBN:Nasdaq) finished Tuesday up 4 15/16 to 22 15/16 after hitting an early high of 26 1/2, up 47%. The stock's 27% gain lags far behind this year's 114% average first-day gain for Internet IPOs, according to

Thomson Financial Securities Data

. Volume was massive, with 33.8 million shares changing hands.

The

Barnes & Noble

(BKS) - Get Report

unit's performance offers more evidence that Internet stocks may be entering a bear market. Most are well off their highs, and Internet IPOs have been weakening for some time.

"There's been a big give-back in the Internet sector, and we've seen a toning down of aftermarket performance

of IPOs as a result," says Peter Blanton, an investment banker for

Credit Suisse First Boston

. Net IPOs have also been hurt by factors such as underwriters ratcheting up initial prices and offering sizes.

Indeed, both conditions may have played a role in the relative unsuccess of barnesandnoble.com's IPO.

Goldman Sachs

, the lead underwriter, had pushed the pricing range for the New York-based company's to between 16 and 18 from 11 to 13. And by selling 25 million shares, or 17.9% of the company, barnesandnoble.com guaranteed a hefty market capitalization -- now $3.2 billion -- no matter where it closed. Barnes & Noble and

Bertelsmann

own the rest of barnesandnoble.com through a separate class of shares.

Yet Tuesday brought at least one positive indicator as well for the sector.

DLJdirect

, the online brokerage unit of

Donaldson Lufkin & Jenrette

(DLJ)

, priced its own IPO after the close at 20, the high end of its range. The offering is expected to be a success, given the rich valuations of other online brokers such as

E*Trade

(EGRP)

and

Ameritrade

(AMTD) - Get Report

. But even they have seen their stocks battered in recent days.

Most Internet offerings have been south of 10 million shares, which is small enough that at least initially the demand has overwhelmed the supply, propelling prices skyward. For example,

theglobe.com

(TGLO)

offered just 3.1 million shares in its Nov. 12 initial offering, and its stock surged 606%.

There's been a flood of Internet IPOs as well. Since March, 77 Internet companies have filed for initial public offerings, Securities Data said. In the same period last year, 12 such deals were filed.

Finally, barnesandnoble.com isn't a pure Internet play, but instead is part of a bricks-and-mortar company. And it has lagged far behind Internet behemoth

Amazon.com

(AMZN) - Get Report

: In the quarter ended March 31, barnesandnoble.com reported sales of $32.3 million, far short of the $293.6 million that Amazon reported in its most recent first quarter. At the same time, barnesandnoble.com spent a third as much as Amazon.com on sales and marketing.

barnesandnoble.com "has not been as aggressive or successful in terms of branding as Amazon," says Sara Zeilstra, an analyst at

Warburg Dillon Read

who rates Amazon hold and has no underwriting relationship with the company. "They just assumed that because everyone knew them in the real world, everyone would know them online. That's not the case."

To be sure, barnesandnoble.com's performance would stand out among non-Internet IPOs. But expectations changed dramatically with IPOs such as theglobe and

CBS MarketWatch.com

(MKTW)

, whose shares more than quadrupled on the day of their trading debut, Jan. 15.

And some observers tried to frame the barnesandnoble.com setback against the days before the Internet IPO craze.

"It's hard to say if barnesandnoble.com didn't do well since you are comparing reality to Internet hype," says Suzanne Richardson, an investment banker for

Friedman Billings Ramsey

. Valuations are so high for so many Internet stocks that prices could fall a great deal and these stocks would still be richly valued, she adds.

One immediate effect the IPO market could see -- and arguably has already seen -- is that investors could lose their love for anything.com and start differentiating between good and bad deals, says John O'Donnell, of

bbsnet Worldwide

, a Portsmouth, R.I., consulting firm that specializes in Internet companies. "People will start separating the IPOs that chant the Internet as a mantra and those with a business model that want to use the Internet for what it is -- a low-cost, expansive distribution mechanism," O'Donnell says.

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