Internet stocks set a blistering pace Wednesday after Amazon.com and eBay posted better-than-expected results for the latest quarter. But the broader market took a pounding as investors opted to play it safe and cash in on the gains from Tuesday's hefty advance.
The sell-off gathered steam in the late afternoon. Most tech shares, which had held firm for much of the day, finally succumbed to the down-trend and followed the blue chips southward.
The Dow Jones Industrial Average fell 124.35 points to close at 9200.23. The Nasdaq Composite Index shed 26.23 to 2407.18, and the S&P 500 was down 9.12 at 1243.19.
Amazon (AMZN) climbed US$10.53 to $125.63 after saying its loss for the fourth quarter wasn't quite as bad as people had feared -- 14 cents a share versus the predicted 18 cents. No matter how much cash this company bleeds, investors remain convinced that the game is still Amazon's to lose, and are determined to stick with the stock until they're proven right ... no matter how long this might take.
"It's scary -- absolutely it's scary," said Brian Oakes, an analyst with Lehman Brothers. "Anything that's a high-growth stock is scary. But don't let profit stop you. This is a market that chases growth, and the greatest growth is in the Internet."
You want growth? Try eBay (EBAY) on for size. The online auctioneer soared 37 percent to $303.50 after whipping the Street's estimates with a 700-percent increase in quarterly profit to 7 cents a share, plus a three-for-one stock split. Never mind the nagging complaints from users about frequent breakdowns, and never mind a confirmation from New York City officials that they are indeed probing the company for alleged consumer fraud -- look instead at the stats.
EBay said its number of registered users nearly doubled as of last month to 2.1 million, and that the total value of goodies sold at its site reached more than $300 million over the last three months, up 57 percent from the previous quarter. The more than 600-percent hike in revenues prompted Donaldson, Lufkin & Jenrette to raise its 12-month price target for eBay's stock to a whopping $360.
Expensive? You bet. "Buy eBay and enjoy the ride," DLJ analyst Jamie Kiggen said in a note to clients. They might want to check their seat belts and air bags first.
Yahoo (YHOO) slid $15.38 to $335.88 even as it launched local versions of its service in Singapore, Taiwan, and Hong Kong. Yahoo now boasts 18 separate properties worldwide. America Online (AOL), meanwhile, was up $7 at $162 ahead of reporting its own quarterly results after the closing bell. Profit of at least 14 cents a share was anticipated.
Despite the mixed showing, Lehman's Oakes advises investors to focus on Net outfits like these, the ones that write the rules for the rest of the .com crowd. "It's dangerous to play the Internet laggards -- the me-too companies," he said. "I buy the leaders for each business model."
In other words, Oakes like eBay but not uBid, Yahoo but not Infoseek. He also began coverage of At Home (ATHM) with an "outperform" rating (its stock jumped $6.13 to $116), and of Broadcast.com (BCST) with a "buy" (up $13.19 at $151.94).
In other earnings news, Broadcom (BRCM), the leading maker of chips for cable modems, vaulted 12 percent to $145 after announcing a fourfold increase in quarterly income to 26 cents a share, topping the expected 20 cents. The company also said it's planning a two-for-one stock split next month. For its part, online software retailer Egghead.com (EGGS) tumbled 12 percent to $17.63 after reporting that its third-quarter loss had widened to 36 cents a share.
Compaq Computer (CPQ) slipped $2.25 to $47 after DLJ downgraded the company's stock to "buy" from "top pick." Although Compaq handily beat estimates with quarterly profit of 43 cents a diluted share, the busy brokerage appears to be wary of how much momentum Compaq can bring to future computer sales.
In telecom, Bell Atlantic (BEL) rose 19 cents to $55.75 after posting a 13-percent increase in quarterly net income to 65 cents a diluted share. AT&T (T), meantime, was down $1.56 at $85.31 even as it unveiled a new service offering customers a flat rate and a single monthly bill for long-distance and wireless calls. Expect more such conveniences in months ahead as AT&T completes its acquisition of cable giant Tele-Communications Inc.
Sony (SNE) advanced 69 cents to $70.44 after saying its group net profit was up in the latest quarter, even though the sky-high yen blasted a hole in the company's operating profit. Considering the current state of Japan's anemic economy, it's a wonder that Sony is keeping its head above water, let alone paying its bills.
Disney (DIS) fell $1.63 to $32.94 after reporting an 18 percent drop in quarterly profit to 30 cents a share. And this amount was bolstered by a one-time "benefit" resulting from Team Mickey's purchase of a 43 percent stake in Infoseek. Without that little bit of fiscal largesse, the company's profit would have been 23 cents a share, or a penny less than analysts were expecting.
First Union (FTU), America's sixth-largest bank, fell $4.88 to $52.19 after warning that its 1999 earnings will suffer from a slowing economy and higher expenses. And oil giant Mobil (MOB) was 88 cents lower at $87.69 after posting a fourth-quarter loss of 21 cents a diluted share, compared with profit of 86 cents a year ago.
Lastly, an outfit called Executone Information Systems (XTON) surged 40 percent to $3.50 on word that shareholders had unanimously approved going ahead with plans to spin off the company's eLottery unit. The move should come within the next few months.
Now there's a recipe for riches: offering lottery tickets worldwide via the Web. You want to bet the day traders are keeping a close watch on this one?
