Net stocks extend week’s gains

Investors shift back to long-term focus

NEW YORK (CBS.MW) — Net stocks extended their gains Tuesday with shares of better-known names attracting the lion’s share of interest.

The Goldman Sachs Internet Index added 2 percent, after gaining nearly 2 percent Monday. The Amex Internet Index inched up 1 percent, after adding 1.4 percent Monday. Merrill Lynch Internet Holdrs rose 1.6 percent, after rising 2.8 percent Monday.

The gains were sprinkled across the board, with a notable lock-step movement in the Net’s two beleaguered e-tailing names, EBay and Amazon.com.

“There’s been a real myopic view and short-term focus in the sector,” said Steven Weinstein, an analyst at Pacific Crest, an investment bank holding a two-day Internet conference. “But when EBay CEO Meg Whitman talks about EBay being a global trading platform, then investors begin to realize the monstrous opportunity EBay has and why they bought these stocks in the first place.”

Moreover, the whole sector is trading at depressed levels, noted Safa Rashtchy, an analyst at U.S. Bancorp Piper Jaffray. “To the extent that an investor wants exposure to this group, they’ll look at the more established names first.”

EBay (EBAY) gained 3 11/16, or 8 percent, to 51 7/8. EBay CEO Meg Whitman gave the keynote speech on Monday evening at Pacific Crest’s 2000 E.Conference in Vail, Colo., where 70 Internet companies are presenting. According to attendees, Whitman said the company is on track to offer translation services for auctions. That service had already been announced.

After Monday’s 4 percent rise, Amazon.com (AMZN) shot up another 2 1//16, or 8 percent, to 37 9/16 on 8.45 million shares.

Drugstore.com (DSCM) and Amazon.com had some of the largest upside revisions for earnings estimates, noted Brian Belski, fundamental market strategist at U.S. Bancorp Piper Jaffray. “This could be an early sign that earnings are improving going out and the market isn’t picking up on it yet.”

‘Tangible benchmarks’

“There’s about 200 investors and representatives from the major institutions here,” said Pacific Crest CEO Scott Sandbo, in an interview with CBS.MarketWatch.com
.

The attendance suggests there is a “high degree” of interest in the Internet sector, particularly for the companies that are considered leaders in their respective spaces, he said.

“But investors continue to drill down a level or two deeper and hold these companies accountable by asking for specific tangible benchmarks,” he said.

While investors are seeking tangible benchmarks, Net CEOs may be reluctant to share information in light of the selective-disclosure rule approved last week by the Securities and Exchange Commission.

“The freshest theme I’m seeing is that the selective-disclosure guidelines have company executives apprehensive about disclosing certain information,” said Tim Butler, an e-finance analyst at Pacific Crest. “They seem to be reluctant to discuss information that hasn’t been disclosed in previous press releases.”

Indeed, the CEOs of the online brokerage companies he follows maintained the outlook that online trading volumes would decline by between 10 and 15 percent in the third quarter. It’s also unclear whether online trading volumes in the fourth quarter would surpass the volume registered in the first quarter of this year, said Butler.

Other executives who presented at the Pacific Crest conference include representatives from CNet (CNET), Inktomi (INKT), VeriSign (VRSN) and VerticalNet (VERT).

Shares of CNet rose 7/8, or 3 percent, to 27 7/8. Inktomi slipped 3 percent to 105 ¼, after trading as high as 111 15/16 earlier. VeriSign rose 5 percent to 154 3/16.

Travelocity (TVLY) inched up 1/16 to 12 5/8. Shares of online travel agencies have come under pressure, partly on concerns that the major airlines will dominate online ticket sales. “This is simply not the case,” said Travelocity CEO Terrell Jones, who presented at the Pacific Crest conference.

“Major airlines focus on business travel, and we focus on leisure travel, so there’s room for both,” he said.

Additionally, Travelocity announced that it’s creating an online site in Japan through a partnership with Japan Airlines and ANA, the two largest airlines in Japan.

Of note…

HearMe (HEAR) ran up 2 11/16, or 63 percent, to 6 15/16 on volume of 6 million shares. Shares of HearMe soared Tuesday after the company said its real-time voice communications technology was selected for integration in Qualcomm’s Eudora e-mail service.