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ANALYST WATCH: Christmas in July for Internet investors

Facing the reality of a slowing market for at least the next month, analysts are now turning their attention to Internet stocks that will be ready to pop once the summer doldrums pass.

And it's not too early to starting investing in those Internet stocks that will almost certainly surge during the Christmas shopping season. If last fall is any indication, consumers will be even more likely to use the flood of e-tailing sites that have popped up in the past year.

Keith Benjamin, an Internet stock analyst at BancBoston Robertson Stephens, said aside from buying the proven leaders such as America Online Inc. (NYSE: AOL), Inc. (Nasdaq: AMZN) or TicketMaster-CitySearch Online Inc. (Nasdaq: TMCS), investors might want to just take the whole month of August off.

"With reporting season effectively ending this week, investors seem to be numb to news, possibly in anticipation of a slow August," he said in a research report. "With stocks generally far below highs, we expect more inactivity than much further erosion. Still, we think the best strategy for a few weeks might be to do nothing."

It didn't help that the Gross Domestic Product grew at a slower-than-expected rate last month while the Employment Cost Index increased sharply. Those two factors stung Wall Street this week, especially the Internets.

What Internet stocks are good bets this fall?

Last year, it was all about This time around, look for eToys Inc. (Nasdaq: ETYS) to make some inroads. Also, the online auctioneers will see dramatic sales growth as shoppers log on to bid for gifts, especially whatever becomes this year's ferbie or Tickle Me Elmo.

PC makers that have ramped up their online presence, specifically IBM Corp. (NYSE: IBM), Gateway Inc. (NYSE: GTW) and Apple Computer Inc. (Nasdaq: AAPL) will benefit not only from the Christmas shopping season but also the seasonal back-to-school burst.

Internet analysts say it's important to set yourself up now for an expected run-up in e-commerce stocks.

eBay Inc. (Nasdaq: EBAY) appears to have overcome their technical glitches from a couple weeks ago and posted better-than-expected earnings and sales in its second quarter. While the stock's still pricey at around $100 a share, it's well off its 52-week high of $234 set in April.

"We believe eBay's highly scalable business model could become even more evident as the company expands into higher price point products such as artwork, fine antiques, and cars in local markets," said BBRS analyst Lauren Cooks Levitan. "Despite the near-term shift in operating profits, driven by ramped up operating expenses, we believe the eBay business model is still very much intact and continues to hold significant open-ended opportunities and compelling profit potential."

Among other Internet stocks worth taking a look at down the road; TicketMaster-CitySearch Online Inc. (Nasdaq: TMCS), Redback Networks Inc. (Nasdaq: RBAK) and Copper Mountain Inc. (Nasdaq: CMNT).