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Netscape stock falls again

Netscape shares fall by nearly ten percent after another analyst downgrades his stock recommendation.

Shares of Netscape Communications (NSCP) fell by nearly ten percent today after another analyst downgraded his recommendation for the stock.

The drop occurred after Bruce Smith of Merrill Lynch said the company's sales may be slowing. Netscape's stock closed at 42-1/4, down from yesterday's 46-3/4. The stock traded as low as 41-7/8 during the day.

The stock's recent decline began January 8, when it plummented 18.5 percent after analyst William Gurley's downgraded his recommendation to "accumulate" from "buy." Gurley, an analyst with Deutsche Morgan Grenfell, worried that Netscape would not head down its usual path and beat Wall Street's estimates when it reports its results for the fourth quarter.

Netscape representatives were mystified by Smith's downgrade.

"Overall, his report has been somewhat puzzling to us," spokeswoman Jennifer O'Mahony said. "His information is the same as what other analysts have, yet three analysts have reiterated their buy rating on us today, including Morgan Stanley and Goldman Sachs. It seems no one else shares his [opinion]."

Indeed, other analysts are holding firm or even increasing their estimates. Morgan Stanley raised its ratings to "strong buy" from "outperform."

Some are maintaining their recommendations. "There's no change in our estimates. We still expect 10 cents a share for the quarter," said David Readerman, an analyst for Montgomery Securities. "As for our position, it's still a trading buy, and we're generally advising accounts to accumulate the stock in the mid-40s but be less aggressive at higher levels."

Marshall Senk, an analyst with Robertson Stephens, also expects Netscape to meet its earnings forecast and does not project a light quarter, according to Emily Williams, Senk's assistant. Robertson Stephens rates the company as "buy" and estimates that its quarterly results will be 12 cents a share.

Williams added that Senk, who relayed his comments while traveling, does not view DMG's expectations of a light quarter as valid. Gurley, who was not available for comment, noted in his report that the company is expected to meet Wall Street's earnings estimates of 11 cents a share.

The Internet company, best known for its browsers and server software, has tended to beat the street's predictions in its short history. For example, the company announced third-quarter profits of $7.7 million, or 9 cents a share--beating analysts' estimates of 8 cents. The result: Netscape stock popped up 12 percent.

Netscape plans to report its quarterly results on January 28.