shares continued their tumble
today, dropping as low as 18 percent over two days as
analysts lowered their estimates based on the
company's second-quarter performance.
Shares of the Internet software company fell as low
as 36-1/2 in morning trading before ending the day at
37-1/4. That's down 2-3/8 from yesterday, when the market hammered it
down 11 percent under trading volume of more
than twice the average day's 3 million shares.
Netscape, which posted strong revenue growth and profits, excluding
one-time acquisition charges, has indicated it plans to heavily reinvest in
research and development, along with sales and marketing. That has given
Wall Street concern that the company may no longer be able to greatly expand its
Analysts have dropped their fiscal 1997 earnings estimates to 48 cents a
share from 52 cents, according to First
Call. The lowering of estimates came yesterday; Netscape
reported its second-quarter results after the market's close on Tuesday.
One analyst, however, upped the earnings estimate by 2 cents, said Chuck
Hill, a First Call spokesman. The revised range of estimates span from 41
to 51 cents a share.
Some analysts who were already bearish on the stock, like Volpe Brown Whelan & Company's Charles Finnie,
said unexpectedly high spending will disappoint investors who had hoped for expanding
profit margins on new products.
"We believe it's the last rabbit they can pull out of
a hat," he said of Netscape's second-quarter results. "While
we admire the company and we admire its vision, we think the
stock is wildly overvalued."
Meanwhile, analyst Bruce Smith with Merrill
Lynch said in his report that the company has indicated its operating
margins are not expected to expand as rapidly as anticipated; that could
be an issue going forward.
He added, however, "Netscape exceeded revenue expectations with its strong
services and good introduction of Communicator."
Netscape reported revenues of $135.2 million for the quarter, up from 75
a year earlier. Those results took many analysts by surprise on the upside.
The company post net profits of $8.8
million, or 10 cents a share, excluding one-time acquisition charges--a
52 percent increase from $5.8
million, or 7 cents a share, a year ago.
Reuters contributed to this story.