Summer is here, which is a happy time for beachgoers, kids and anyone else who can get some time off. For shareholders of Internet companies summer may be a different story entirely.
Here come the doldrums and this week will give a first indicator of how the summer will play out. Memorial Day will be history, volume will be light and and the golf course will look a lot more promising than daytrading.
The summer doldrums for tech-related issues is nothing new. The conventional wisdom is that most tech stocks, including Internet issues, take a breather in the summer. Summer wouldn't be such a big deal if Internet issues weren't getting hammered this spring (chart).
Yahoo! (Nasdaq: YHOO) and Amazon.com (Nasdaq: AMZN) are barely showing year-to-date gains after taking lumps because quarterly earnings didn't impress Wall Street. America Online (NYSE: AOL), Priceline (Nasdaq: PCLN) and others are well off highs set in April. Newly minted .coms make a big IPO splash and then retreat just a few days later. Some new .coms don't make a splash at all.
"Internet stocks went up on a lot of hype and now the money is scared," said Harry Aloof, a technical analyst and author of the Wall Street Trader's Column.
Analysts said the strong growth that drove the Internet stocks is still there, but the psychology has changed. In addition, there's not a lot of news to move Internet shares in the summer. Earnings season doesn't start until early July and results from the June quarter won't be that impressive anyway. Media Metrix statistics showed a seasonal Web slowdown in April. And it's also too early to anticipate gargantuan holiday e-commerce sales.
"The recent pull-back in the spring has been followed by stalled rallies, and a continued gradual decline," said James Preissler, an analyst with PaineWebber. "As we enter the summer, a historically slow time for technology investing, we are concerned about this lack of momentum. We believe industry fundamentals remain intact. However, summer, due to the better weather and vacations, lacks the inherent news and events that may be required to drive the Internet sector."
Abhishek Gami, an analyst with William Blair & Co., said new offerings and acquisitions could boost Internet stocks, but acknowledged it will be a quiet ride until late summer.
The big question for Gami and other analysts is what Internet stocks do until earnings season in July. The answer is not much.
"Summer features light usage, light advertising, and light commerce," said Henry Blodget, an analyst with Merrill Lynch. "Once we get through July and August, however, the 1999 holiday season will be only a few months away. "
For Internet investors the holiday season can't come soon enough.
Other events in the week ahead:
IPO Shocker! Sanity returns
Time for an Internet IPO breather?
Analysis: Do yourself a favor, buy a Net stock