Internet stocks that have floundered during the past several weeks got a bump this morning, buoyed by double-digit gains yesterday, but one analyst tempered hopes that the activity marks the beginning of another bull run.
"This is a blip. Over the next couple of months, it'll be flight for quality," said Lise Buyer, an analyst with Credit Suisse First Boston. "Investors want to get their toes in the water, but the extreme momentum is of the past."
During the bull market that has cooled off only recently, tech investors snapped up Internet stocks as fast as they could, betting that many or all would take off. But when the Dow Jones Industrial Average plunged nearly 513 points in a single late-August day, taking a number of Internet stocks down with it, investors became more selective and increasingly started to go after blue chips.
Technology companies included on the roster of blue chips typically are large Internet companies that are highly liquid, allowing investors to easily buy and sell shares. America Online, Yahoo, and Amazon are included among the ranks.
But Internet companies on the next wrung aren't totally out of luck. As companies report their quarterly earnings results next month, those that surprise Wall Street with better-than-expected revenues and report compelling financial results likely will see a boost in their stocks despite market conditions.
Those companies that don't show the expected momentum, however, are likely to get hit particularly hard in the current volatile market, unlike in the previous, full-steam-ahead climate.
"In a bull market, all good news is good, all bad news is bad," Buyer said. "But in a bear market, all good news is good, and all bad news is time to call the trading desk with a sell order."
Announcements yesterday that AT&T was signing up Yahoo for its WorldNet Internet access service, and that Dell was teaming up with WorldNet and Excite to provide Internet access for its consumer and small-office lines of computers, contributed as well, Buyer said.
Also driving up the share price of Internet companies over the past few days was a spike in the number of page views sites received as people turned to the Net to read independent counsel Kenneth Starr's report to Congress on President Clinton's relationship with Monica Lewinsky, and to download the video of Clinton's grand jury testimony regarding the matter. Investors envision higher advertising revenues for companies that published the report, as a result of what they perceive as greater acceptance of the Internet as a mass medium.
"The institutional investors didn't want to miss the [upward] bounce," Buyer said of yesterday's stock activity, adding as a cautionary note, "They were way up this morning, but have now given some of those gains back."