Is there a limit to how high Amazon.com can fly? At least one brokerage hardly thinks so as it predicted Wednesday that Amazon's shares would reach US$400 apiece within a year, giving the money-losing company a market capitalization of well over $30 billion.
While Amazon rocketed to a record high on that rosy forecast, the broader market lost ground as investors mulled the short-term prospects of both corporate earnings and Bill Clinton's presidency. News that increasing tension in Iraq might lead Congress to delay its impeachment vote helped Wall Street recover some composure in the late afternoon, but not enough to reverse earlier declines.
The Wired Index gained 1.34 points to close at 476.49, while the Dow Jones Industrial Average was 32.70 lower at 8790.60. The Nasdaq Composite Index shed 3.24 to 2009.36, and the S&P 500 was down 0.89 at 1161.94.
Investor enthusiasm took a wallop after Minnesota Mining & Manufacturing (MMM), the fun guys who bring us Post-it Notes, warned that fourth-quarter earnings will be about 10 percent lower than the 89 cents a share seen a year earlier. 3M joins such other heavyweights as Coca-Cola (KO), Procter & Gamble (PG), and Mattel (MAT) in pouring cold water on traders' expectations.
That's in the real world. In the parallel universe occupied by Internet stocks, everything's hunky-dory. Amazon (AMZN) set the pace, climbing $46.25, or 19 percent, to $289 after CIBC Oppenheimer analyst Henry Blodget upped his 12-month price target and reiterated a "buy" rating for the stock.
While admitting such a valuation is only for "strong-stomached long-term investors," he said Amazon "is in the early stages of building a global electronic-retailing franchise that could generate $10 billion in revenue ... within five years." Blodget added that profit of $10 a share is a possibility -- not bad for an outfit that has yet to see a dime.
"That's a pretty lofty valuation," said Steve Franco, an analyst at rival investment bank Piper Jaffray. Still, he readily conceded that Amazon "has become one of those stocks investors have ordained a winner in the digital economy."
Will the company's shares actually reach $400? Franco isn't sure, but he believes only three Internet companies have a shot at scaling such heights: Amazon, Yahoo, and America Online. "The type of stocks that can run away like this, it's a pretty elite group," he noted.
AOL (AOL) did its best to keep pace, advancing $3.88 to $96.63 on word that 750,000 of its 14 million members purchased goodies online for the first time during the past two weeks. This vote of confidence had a predictable effect on other e-commerce plays, with Yahoo (YHOO) rising $7.13 to $205.13, and eBay (EBAY) up $29.50, or 15 percent, at $223.50.
Meanwhile, Books-A-Million (BAMM) surged $8.06, or 80 percent, to $18.13 on news that the Amazon wannabe plans to acquire NetCentral, an Internet development firm that revamped Books-A-Million's own site. The fact that the deal involves the Net apparently was all the reason investors needed to throw money at the company.
In tech, International Business Machines (IBM) slipped 13 cents to $164.88 even as Credit Suisse First Boston hiked its price target for the company's stock to $185 from $160. Compaq Computer (CPQ) lost $1.19 to $40.63 after cutting prices up to 7 percent for a new line of computers aimed at small- and medium-sized business users.
Dell Computer (DELL) slid 69 cents to $64.88, while Intel (INTC) was $1.81 lower at $114.13. Microsoft (MSFT) gained $1.88 to $133.75, and Cisco Systems (CSCO) was down $1.06 at $82.69.
Energy powerhouse Enron (ENE) advanced $1.75 to $55.19 after saying it had received an unsolicited offer for its oil-exploration subsidiary, Enron Oil & Gas. Oil stocks also benefitted from the situation in Iraq and a related spike in crude prices.
Genentech (GNE) climbed $3 to $71.63 as Salomon Smith Barney upgraded the biotech company's stock to "buy" from "outperform." Analyst Meirav Chovav pointed to Genentech's expected five-year growth rate of as much as 30 percent, and predicted the stock will reach $90 within a year.
Lastly, it's our old pal K-Tel International (KTEL), grooving to "Funky Town" and unashamedly doing the hustle. The music repackager's stock leaped $1.19, or 9.6 percent, to $13.50 on news that it will issue more shares to try to meet Nasdaq listing requirements. Additionally, K-Tel said it's expecting a quarterly loss of about $1 million, mostly due to its efforts to become an online dynamo.
Any analysts out there care to make a projection?
