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Amazon, RealNetworks rally

Numerous Net stocks show signs of life after first missing the broader market's rebound.

Dawn Kawamoto Former Staff writer, CNET News
Dawn Kawamoto covered enterprise security and financial news relating to technology for CNET News.
Dawn Kawamoto
2 min read
Internet stocks came back to life today, catching up to the rest of Wall Street a day after many other companies rode a broader market rebound.

Amazon.com jumped more than 14 percent, RealNetworks rose more than 23 percent, and Broadcast.com was up more than 9 percent in midmorning trading. The companies had continued to decline yesterday despite general market gains that helped offset Monday's heart-stopping 512-point plunge in the Dow.

Analysts suspect that these stocks were weighed down yesterday by valuations that remain too heavy for investors' tastes. In one case, an analyst's upgrade of RealNetworks was not enough to convince investors that the stock made for a good buy.

"I guess the market feels there are still some stocks out there that are overvalued," said Steve Horen, an analyst with NationsBanc Montgomery Securities.

"It's not a value judgment on a company, which is not to say it's a bad company. But clearly, if the stocks are going down while the rest of a sector is going up, then it tells you, for whatever reason, it's overvalued."

Broadcast.com, which last month shot out the door with a tremendously successful initial public offering that priced at 18 per share and rose as high as 74 in its first day of trading, failed to post a gain yesterday. The stock has been on a steep slide since mid-August, when it traded in the mid-50s.

RealNetworks, despite an upgrade from BancBoston Robertson Stephens analyst John Powers, fell 11.4 percent to close at 17.50 per share yesterday.

Powers upgraded the company to a "strong buy" from "long-term attractive," noting the falling valuation is creating "an exciting buying opportunity." RealNetworks is trading around 6.4 times its 1999 estimated revenues, following the recent sell-off, he added in his report.

Amazon.com, meanwhile, saw its share price drop 4.5 percent to close at 79.9531 yesterday. That drop came as Merrill Lynch analyst Jonathan Cohen initiated coverage with a near-term "reduce" and long-term "neutral," according to Bloomberg.

"I love this company [Amazon], but I have a hold on them because of their valuation. It's still a level higher than I would want before going back to a 'buy' recommendation," Horen said.