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HolidayBuyer's Guide
Tech Industry

Internet stocks still stuck in reverse

Despite some hopeful comments from analysts, leading Internet stocks continued to struggle Monday. eBay, America Online and Lycos were among the group's biggest decliners.

America Online Inc. (NYSE: AOL) fell 3 1/8 to 82 7/8, its lowest price since early March. eBay (Nasdaq: EBAY) fell another 6 9/32 to 134 23 /32 and Lycos Inc. (Nasdaq: LCOS) shed 1 1/4 to 27 1/2.

Only Yahoo! Inc. (Nasdaq: YHOO) was able to buck the trend, gaining 2 1/2 to 165 5/8.

"Uncertainty regarding interest rates is still affecting the group, in our opinion, and that could continue to weigh down Internet stocks until the interest rate issue is resolved," said James Preissler, an analyst at PaineWebber, in a research note. "Despite the positive fundamentals, the aggressive pushing of the Internet sector by the sell-side, and continued attention from retail investors - the Internet sector rally has failed to materialize in a meaningful way, beyond a end-of-summer rally in August."

Estimated total U.S. web users climbed about 240,000 for the second straight month from 62.9 million in July to 63.1 million in August, less than the average increase of about 750,000, but understandable in light of the slow summer seasonality.

AOL remained in the top spot with a reach of more than 67 percent followed by Yahoo! and Microsoft Corp. (Nasdaq: MSFT) sites at 64 percent and 56 percent, respectively. Lycos was next at 47 percent reach, but its total user base fell by 1 million users to 29 million.

Despite these less-than-auspicious numbers, Internet analysts remain confident the holiday shopping season will spark renewed interest in online retailers and portals.

"As people return from summer vacations and as the weather turns colder, we expect users to increase usage time on the Internet," Preissler said. "In early September, company management, as well as investors, return to work increasing the flow of information from companies in the form of press releases."

Among online retailers, Amazon.com retained its top spot, with 11.6 million users or a reach of 18 percent. eBay was third with 8.7 million users and barnesandnoble.com was fourth with 4.8 million users.