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Internet stocks retreat after surge

Investors scramble to lock in the profits that Internet stocks have seen recently, causing the issues to fall.

They have been to mountain top, and today they started to trek back down.

Investors scrambled to lock in the profits that Internet stocks have seen recently. That sell-off, along with a possible shift back into some semiconductor and personal computer stocks that has slowed during recent days, caused the stocks to fall, analysts said.

Today the big four navigational companies, which each have leaped into record territory of late, swapped some of their recent gains for losses. Infoseek (SEEK) fell 2-3/16, or 11 percent, to end at 18-9/16; Excite (XCIT) dropped 9 percent, to 51; Lycos (LCOS) lost 3-1/16, to 42-1/4; and OnSale (ONSL) slipped 1-1/2, to 33-1/2.

"These prices have been a bit aggressive, and it is hard for us to justify that price for today," said Andrea Williams, a Volpe Brown Whelan analyst who chose to maintain her "neutral" rating on Yahoo stock.

"These companies have had such a big run based on no news," she said, noting that investors are locking in profits by selling some of the issues that have had big runs during recent weeks.

Williams said there has been "a frenzy of interest" as URLs have infiltrated into everyday life, making Internet stocks known to the average consumer and investor--regardless of whether they are online. "[Yahoo and (AMZN)] are on TV and in magazines. They are everywhere," she said, pointing out that, as more consumers get wired and see the value of select Web sites, interest in the stocks of those sites will be boosted.

One Internet stock that bucked the trend today was online grocer Peapod (PPOD). The company saw its stock soar 25 percent, to 6-15/32.

Williams said Peapod is probably the only Internet stock that hasn't had a big run lately, and investors are searching for stocks in this area that have room to grow, rather than those that have doubled recently, like the search stocks.

Another reason for the pullback, she said, could be that the initial shock that caused stocks in the PC and semiconductor sectors to drop now has leveled off, after investors have had a week to digest the bad news.

One industry observer who asked not to be named said, however, that it is too soon for investors to be shifting back into semiconductor and PC stocks.

"There was sector rotation [out of Intel (INTC) and Compaq (CPQ)] just last week, and they wouldn't be changing their minds back again just two days later," he said.

Technology investors and fund managers sold out of companies such as Intel, Motorola (MOT), and Compaq after they announced last week that they would miss expectations. Internet stocks were the benefactors of some of that shift, analysts said.