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Net stocks lukewarm on earnings

Internet's biggest hitters report stellar earnings, but why aren't stock prices rising? Wall Street knows why.

Some of the Internet's biggest hitters have reported stellar earnings this week, only to see their stock price grounded--no surprise to Wall Street analysts, who didn't expect any big jolt in share price despite those robust reports.

One reason, as ABN AMRO analyst Scott Appleby sees it, is that many Net stocks' share prices have already gained more than 30 percent over the past two weeks. Take eBay, for example: the online auctioneer's shares rose nearly 50 percent Monday in anticipation of the company's first earnings report.

Today, all eyes are on Amazon.com, which is expected to report a loss of 57 cents per share for the third quarter. Amazon shares jumped 2.1875 to 118.5 in anticipation of the report after the bell.

Yesterday, eBay reported earnings of $2 million, or 5 cents a share, excluding one-time charges, for the third quarter. That's 2 cents higher than Wall Street expected, according to First Call.

Yet shares of eBay didn't move much in afternoon trading today, up 0.25 to 82.75. The profitable Net newcomer is down from a 52-week high of 90.8125, hit on Oct. 27.

The cancellation of many Net IPOs in the past week also is putting pressure on the sector. Just today, Web software company Allaire withdrew a planned $35 million initial public offering.

At these levels and given the continued volatility of the broader market, many traders may not want to bid Internet stocks much higher, at least in the near term. Following a short-lived tech rally yesterday, the Nasdaq traded higher, up 12.5 points to 1730.1 in afternoon trading.

Also yesterday, AOL posted a net profit of $68 million, or 26 cents a share, beating Wall Street's expectations by three cents. The Internet bellwether also announced a 2-for-1 stock split, effective Nov. 17.

AOL shares, despite beating street estimates and announcing a stock split, gained just 0.1875 to 122.1875. AOL hit its 52-week high of 140.5 on July 21.

Amazon today is expected to post after the bell another quarterly loss, but it will record strong revenue growth for the third quarter, analysts said.

The online bookselling giant is expected to record revenues of $140 million to $150 million, Appleby said. That would be a four-fold increase from a year ago, and represent about a 30-percent jump from the previous quarter.

So far, Amazon's revenue has grown at a faster pace than its competitor, barnesandnoble.com--at least through the first half of this year.

"I don't think barnesandnoble.com has had an effect on Amazon," Appleby said. "But I expect barnesandnoble will be more aggressive with its deep-pockets partner in the first quarter next year."

Earlier this month, German publishing giant Bertelsmann took a 50 percent stake in the online book retailer. Barnes & Noble also pulled plans for the initial public offering of barnesandnoble.com, following the announcement of the deal.