High-Flyers Feel Pull of Gravity – Or Rationality

It’s been a fast fall for Amazon.com share prices in the past week or
so. Since April 23 the online retailer has seen its stock nosedive from
$210.13 – its all-time high closing price – to $143 when Tuesday’s
trading session ended. That’s $67.13, or 32% of the stock’s value.

But the company experienced an even bigger stock skid early this year,
when it dropped $78.63 over a 10-day period, going from $184.63 on Jan.
11 to $106 on Jan. 21, a 43% plunge. The stock didn’t regain its footing
until after Feb. 18, when it closed at $89.50 before staging a nine-week
surge.

The difference between then and now, of course, is that we don’t know
when Amazon.com’s latest slide will end. Some investors fear the
flagship e-tailer’s sagging shares are a bellweather for the entire
Internet market, which was rattled in April and remains unsteady.

Others welcome the current turbulence as an overdue antidote to this
year’s run-up of Internet stock prices. No company should be trading at
absurd multiples of revenue, they say, and Amazon.com was selling at 33
times revenue as of May 1. Late last week Barron’s estimated that the
e-tailer’s stock was worth no more than $25 if you take into account
revenue, losses and gross margin.

While Amazon.com may have lost a lot of altitude in recent days, it is
not the only high-flyer that has headed back toward Earth. Several other
Internet stocks have fallen in value since late April. Here’s a look at
some of them:

  • Go2Net — $177.50 (April 21) to $130.75 (May 4) – 26%
  • AOL — $162 (April 26) to $127.13 (May 4) – 22%
  • Yahoo — $192.25 (April 26) to $159.25 (May 4) – 17%
  • CMGI — $281 (April 26) to $235.06 (May 3) – 16%
  • @Home — $160.56 (April 26) to $135.69 (May 4) – 15%
  • Excite — $160.50 (April 26) to $137.75 (May 3) – 14%
  • eBay — $209.25 (April 27) to $181.25 (May 4) – 13%
  • RealNetworks — $221.50 (April 30) to $200.06 (May 3) – 10%

One high-priced Internet stock that has bucked the downward trend is
online banker Net.B@nk. The company closed at $178 on April 26 and rose
up to $197.38 on Monday before finishing at $173.06 on Tuesday.

Latest Internet IPOs Fail to Reach Orbit

The two Internet IPOs that made their debut Tuesday continued the recent
run of less-than-spectacular open days.

MapQuest.com, offered at $15 per share, closed at $22.38, a 49%
increase. And Flycast Communications closed at $29.75, only 19% above
the $25 offer price and the fourth-worst first-day performance of 1999.

Nine of the 14 Internet IPOs rolled out since April 14 have closed at
less than 100% above their offer price. Of the first 33 Internet IPOs
launched in 1999, 10 failed to reach 100% above their offer price on the first day.


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