ANALYST WATCH: E-Tailers struggle; second-tier 'Nets hot

Internet stocks appear to have finally recaptured the momentum that made them the toast of Wall Street back in April. Along with the leaders such as AOL and Yahoo!, analysts are lauding the potential of second-tier players such as Network Solutions and SportsLine USA.

With the Nasdaq stuck in overdrive and investor confidence at its highest level since the spring, Internet analysts are hoping some of the lesser-known issues will be able to ride the coattails of this resurgence.

Not that most people have never heard of Network Solutions (Nasdaq: NSOL) or SportsLine (Nasdaq: SPLN), but they aren't the first stocks one thinks of when it comes time to get back on the Internet bandwagon.

Both stocks were slumping at this time last year before racing up to 52-week highs in March. Investors are hoping a similar run-up is on the horizon.

Phil Leigh, an analyst at Raymond James, said SportLine's current price of around $39 a share represents an excellent value.

"Comparable companies have an enterprise value equal to an average of 33x their estimated 1999 revenues," Leigh said in a research report. "By comparison, SportsLine trades at an enterprise value of only about 15x its estimated 1999 revenues, even after the recent price advances. That translates to a 55 percent discount relative to its peer group."

In its latest quarter, SportsLine earned $5.1 million, or 22 cents a share. Excluding a one-time gain from the early retirement of convertible debt, SportsLine lost $16.7 million, or 72 cents a share, slightly better than the 80-cent-a-share loss First Call consensus had predicted.

SportsLine also saw its unique visitors jumped 15 percent in the quarter to 4.7 million and page views rose to 9.3 million a day.

"Since our rating upgrade of the stock, which was based in part on the valuation differential, the valuation gap has begun to narrow," Leigh said in a research report. "If the market continues to recognize the value of SportsLine's potential versus its peers, the stock price could react favorably."

Network Solutions had its fourth quarter earnings estimate boosted to $64 million, or 23 cents a share, by PaineWebber's Jim Preissler. He also raised its fiscal 2000 revenue estimate from $303 million to $327 million and raised its 12-month price target from $195 a share to $220 a share.

Last quarter, Network Solutions hurdled analysts' estimates, earning $5.8 million, or 17 cents a share, on sales of $47.5 million.

Even though a handful of competitors have sprung up in the past year, Network Solutions still managed to add another 1.3 million domain names in the quarter, bringing its total to more than 6.5 million registrations.

"We believe the company has considerable competitive advantages going forward as the market for domain registration expands, which should continue to drive its ongoing growth," Preissler said in a research note. "With about 6.5 million names already registered, Network Solutions already has a high market share, which will make its position strong as the market expands."

E-tailers' spending scaring off investors

Amazon.com Inc.'s (Nasdaq: AMZN) stock has struggled to muster any momentum since announcing plans to ramp up its infrastructure spending. It and other e-tailers have chosen to beef up their services for the upcoming shopping season, delaying any chances of turning a profit for the foreseeable future.

BancBoston Robertson Stephens' eTailDEX fell for the fourth straight week to 1,062.81, down 10 percent from 1,186.45 last week. The index is still up 31 percent from its recent low in August, but it's down 41 percent from the 52-week high of 1,807.45.

"We believe the market has caught a fairly severe case of post-reporting season syndrome," said analyst Lauren Cooks Levitan in a research report. "Amazon, eBay, eToys and others set an ugly pattern of reporting better-than-expected results, reflecting strong consumer demand and solid momentum, offset by almost universal increases in operating expenses."

In their defense, the likes of Amazon.com and eToys are determined to hold on to the customers they've acquired by making sure their site and services are beyond reproach.

"We believe this strategy is winning customers and fueling higher repeat purchase rates," Levitan said. "While drawing any conclusions from this early wave of results would be premature, we nonetheless look forward to monitoring how traffic patterns and customer experiences evolve as the holiday shopping season heats up."

Rimer latest to bail for VC venture

Hambrecht & Quist analyst Danny Rimer became the latest in a long list of Internet analysts to bolt for the big money of a well-known venture capital firm.

Rimer, 29, will join the Menlo Park, Calif. firm at year's end. The Barksdale Group was started earlier this year by former Netscape CEO James Barksdale and former CFO Peter Currie.

Rimer joins the likes of Keith Benjamin, formerly of BancBoston Robertson Stephens, and William Burnham, formerly of CS First Boston. Benjamin has now moved on to Highland Capital Partners while Burnham is now at Benchmark Capital.