Time to Step Back and Enjoy the Weekend
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The Memorial Day weekend provides welcome relief from a frenetic and frightful month for Internet stocks and IPOs.
May was notable for three things:
- A downturn in the prices of Internet stocks so severe that even Internet bulls started to wonder if the so-called bubble was in the process of bursting;
- A record number of Internet IPOs;
- The cool reception given many of these IPOs, indicating that the market has reached a saturation point.
The downturn can be attributed to any number of things, including a predictable seasonal softening of the market, concerns that Internet companies are terribly overvalued, and fears about inflation and possible interest rate increases. Among the biggest victims in May were high-flyers such as Amazon.com, CMGI, Go2Net and RealNetworks.
But Keith Benjamin of BancBoston Robertson Stephens said the market already may have bottomed out, and expects many stocks to rebound once Q2 earnings reports start coming in.
Some other analysts predict, rather gleefully in my opinion, that the bloodbath for Internet stocks is just beginning.
My guess is that the reality lies somewhere between Meeker and Benjamin. Sure, there's more room to fall, and there absolutely are some bum Internet stocks out there. But Internet stocks have hit bad stretches before (look at last October's charts), only to roar back on the strength of market leaders such as AOL, Amazon.com and eBay.
There were 26 Internet IPOs in May, shattering the April record of 17. Given the bulging IPO pipeline, this new record could be threatened in June, even if some Internet companies postpone plans to offer shares.
However, few of the Internet IPOs that debuted in May blasted off the launch pad, with TheStreet.com and eToys being notable exceptions. Several were duds, either closing their first day of trading at or below the offer price, while the bulk did reasonably well by objective standards but fell prey to the expectations game.
Next Tuesday's StockTracker Daily will tally the average first-day performance of May's Internet IPOs and how it compares to previous months this year.
But I'm taking Monday off. I hope you do too.
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