ANALYST WATCH: VerticalNet shows signs of life

VerticalNet shares got a nice boost this week after several Wall Street analysts weighed in with some generally positive comments. The stock, which peaked at $148.38 in March, needs all the help it can get at this point.

The stock came under even more pressure earlier this month when a rumor circulated that it was interested in buying Ventro (Nasdaq: VNTR), an incubator of online business-to-business marketplaces.

VerticalNet (Nasdaq: VERT) even went so far as to publicly deny the rumor, a move that smacks of desperation considering most publicly traded companies simply offer a terse "no comment" whenever a merger rumor hits the Street.

Then again, you can't really blame VerticalNet for quashing that rumor, considering investors have completely turned their backs on other incubators such as CMGI (Nasdaq: CMGI) and Internet Capital Group (Nasdaq: ICGE).

Of course, just a year ago, this rumor would have sent VerticalNet shares through the roof. My how things have changed.

You have to assume the folks at VerticalNet were in panic after watching their stock collapse and then having already skittish investors pondering the implications of taking on a money-losing incubator like Ventro.

Fortunately, all this selling has finally made the stock appealing, according to some analysts.

"VerticalNet is a significant buying opportunity at these levels," said Lehman Brothers' Patrick Walravens in a research note.

Walravens reiterated his "buy" rating Wednesday, helping to push the stock up 11 percent.

He said VerticalNet's third-quarter results will likely beat his firm's projection of $64 million in sales and a loss of 28 cents a share by as much as 5 to 10 cents a share. Walravens added that concerns the company's NECX business are overblown and the company should weather the eventual turn in the semiconductor cycle.

Merrill Lynch analyst Henry Blodget said the weakness following the Ventro escapade may provide a short-term bounce, but the company still has post outstanding results this quarter to get the stock moving again.

"E-Commerce revenue is the real key," Blodget said. "It will still take several more quarters before most of the company's e-commerce strategies start delivering material results."

Blodget maintains an "accumulate" rating on the stock.

On the same day Lehman upgraded the stock, Robinson Humphrey analyst Frank Gristina cut it from a "buy" to an "outperform."

Gristina said he based the downgrade on the results of a proprietary survey of VerticalNet's storefronts.

"We sent an email survey to over 3,000 storefronts and received responses from 250," he said in a research note. "Based on these responses we are concerned that a large percentage of VerticalNet clients are undecided about whether or not they will renew their subscription with VerticalNet."

Obviously, this quarter will be crucial for VerticalNet to build some momentum heading into the holiday shopping season.

First Call Corp. consensus expects it to lose 29 cents a share this quarter.

Last quarter, it topped analysts' estimates when it lost $18.8 million, or 23 cents a share, on sales of $53.6 million.

Twenty-eight of the 29 analysts following the stock rate it either a "buy" or "strong buy" recommendation.