In these days of high-flying Net stocks, it's not always enough to meet Wall Street's expectations--you have to beat them.
Shares in E*Trade (EGRP) dropped more than 10 percent today, after the company posted quarterly profits yesterday that matched the Street's estimates. One brokerage firm, Deutsche Morgan Grenfell, downgraded the stock from "buy" to "accumulate."
As reported, E*Trade posted second-quarter profits in line with analysts' expectations. The company reported profits of $6.1 million, or 15 cents a share, for the second quarter ended March 31, up from $3.1 million, or 9 cents a share, for the like quarter a year ago. Quarterly revenue rose to $53.3 million, up from $32.2 million.
But Wall Street was not impressed. E*Trade shares tumbled 3-3/8, to close at 23-9/16. The stock has traded as high as 47-7/8 and as low as 13-7/8 during the past 52 weeks. One concern: the future earnings outlook for E*Trade in a cutthroat market.
Some analysts argue that the run-up in Net stocks is based on their earnings projections way ahead of what used to be normal--the year 2000 in some cases. Just making the grade in the meantime sometimes isn't enough.
That's not stopping money from pouring in to Net ventures. VC investments in Net-related companies totaled $1.88 billion last year, a 1,300 percent increase from 1995, according to a new report by Price Waterhouse.