The Horsham, Pa.-based company, which hosts business-to-business Web sites for companies ranging from food distributors to medical suppliers, saw its stock slide nearly 25 percent Friday, after an analyst reported that VerticalNet customers are unhappy with the product and plan to cancel their contracts.
Wedbush Morgan Securities analyst George Santana reported that VerticalNet's largest clients, including its No. 1 customer, 3M, had been complaining that VerticalNet sites were not resulting in the traffic and sales boost they had hoped for. Santana called the results "troubling" and cut his rating on the company to "hold."
But several analysts rushed to VerticalNet's defense Monday, drafting positive research notes and maintaining optimistic 12-month price targets.
Analyst Timothy Getz at Prudential Volpe Technology Group reiterated his "strong buy" rating and his 12-month target price of $100 per share. Analyst Patrick Walravens at Lehman Brothers also reiterated his "buy" rating and an even more bullish 12-month target price of $105 per share.
That's a far cry from the shares' current price, which inched up Monday morning to $22 per share, up 1 percent from Friday's closing price. Like many business-to-business companies stung by the stock market tech wreck in early April, VerticalNet stock is only a fraction of its 52-week high of $148.37.
VerticalNet, whose chief executive is former Amazon.com president Joseph Galli, operates Web sites with news and information targeted at specific industries. Before joining Amazon, Galli was an executive with Black & Decker and a favorite among Wall Street investors. He abruptly resigned from the Seattle-based e-tailer after only 13 months on the job.
Merrill Lynch analysts, including longtime e-commerce bull Henry Blodget, also penned favorable words about VerticalNet on Monday. The report, which did not include 12-month price targets, did not specifically rate the company but lavished praise on the new president.
In a report to investors, Blodget and analyst E. McCabe said they were impressed after a meeting last week with Galli. Galli plans to lead a "road show" of VerticalNet's expected financial performance to various Wall Street financial institutions starting Tuesday.
"Galli recognizes that the key to VerticalNet's long-term value will be the development of its e-commerce strategies, which are in their early stages today," the duo wrote in a report issued Monday. "He has aggressive plans for moving the exchange business online."