1998 was the year Wall Street finally “discovered” the Internet. The stats
tell the story well. ISDEX began 1998 at roughly 100 and ended the year to
December 29 up more than 208% as buying and selling Internet stocks became
front and center for the everyday investor. Day traders swept up the
speculative shares in whirlwinds of dust clouds and hype as the year waned,
looking for an undiscovered gem or trying to catch the latest rising and
often falling star at the fringe of the Internet landscape.
ISDEX Year To Date Results
ISDEX ® | 29-Dec-98 | % change | Point change | % change | |
The Internet Stock Index | close | from | from | from | |
www.isdex.com | 21-Dec-98 | 21-Dec-98 | 31-Dec-97 | ||
or from IPO* | |||||
ISDEX | 308.29 | 2.7% | 8.22 | 208.7% | |
NASDAQ | 2,181.77 | 2.0% | 43.74 | 38.9% | |
DJIA | 9,320.98 | 3.7% | 332.13 | 17.9% | |
eBay* | EBAY | $273.94 | -8% | -$22.44 | 1422% |
Amazon.Com | AMZN | $332.31 | 4% | $13.56 | 1003% |
Network Solutions | NSOL | $134.50 | -18% | -$30.22 | 925% |
CMG Info | CMGI | $126.50 | 1% | $1.75 | 736% |
Yahoo! | YHOO | $270.00 | 9% | $22.50 | 680% |
Inktomi* | INKT | $127.00 | -10% | -$14.00 | 606% |
America Online | AOL | $154.63 | 32% | $37.63 | 583% |
Mindspring | MSPG | $68.00 | 6% | $3.88 | 507% |
Earthlink Network | ELNK | $67.25 | -2% | -$1.50 | 422% |
Broadvision | BVSN | $33.69 | -5% | -$1.69 | 418% |
Broadcom* | BRCM | $123.25 | 3% | $3.38 | 414% |
Infoseek | SEEK | $54.50 | 14% | $6.56 | 407% |
Broadcast.com* | BCST | $88.13 | -3% | -$2.88 | 390% |
Security First Technologies | SONE | $34.38 | 16% | $4.63 | 374% |
Spyglass | SPYG | $23.13 | 11% | $2.25 | 368% |
Verisign* | VRSN | $65.00 | 12% | $7.13 | 364% |
PSINet | PSIX | $22.06 | 30% | $5.06 | 330% |
Exodus* | EXDS | $62.38 | -7% | -$4.38 | 316% |
Concentric | CNCX | $34.50 | 8% | $2.50 | 289% |
Egghead.com | EGGS | $25.19 | 6% | $1.50 | 288% |
CNET | CNWK | $52.50 | -11% | -$6.25 | 247% |
Excite | XCIT | $48.75 | -3% | -$1.63 | 225% |
@Home Network | ATHM | $78.50 | 17% | $11.50 | 212% |
Doubleclick | DCLK | $50.44 | 4% | $1.94 | 197% |
USWeb | USWB | $27.50 | 4% | $1.00 | 193% |
Onsale | ONSL | $51.50 | -24% | -$16.50 | 186% |
RealNetworks | RNWK | $39.50 | -16% | -$7.25 | 185% |
Lycos | LCOS | $57.31 | -2% | -$1.25 | 177% |
Beyond.com | BYND | $24.75 | -4% | -$1.00 | 175% |
Netscape | NSCP | $66.31 | 35% | $17.31 | 172% |
E*TRADE | EGRP | $60.13 | 87% | $28.00 | 161% |
ISS Group* | ISSX | $56.25 | 38% | $15.50 | 156% |
Cisco | CSCO | $93.50 | -1% | -$1.19 | 152% |
CKS Group | CKSG | $35.00 | 0% | $0.00 | 148% |
24/7 Media* | TFSM | $31.25 | 14% | $3.75 | 123% |
GeoCities* | GCTY | $37.44 | -6% | -$2.50 | 120% |
Open Text | OTEXF | $24.50 | 0% | -$0.06 | 83% |
Axent | AXNT | $30.94 | 9% | $2.56 | 79% |
Cyberian Outpost | COOL | $31.94 | -13% | -$4.81 | 77% |
Sportsline USA | SPLN | $17.06 | 7% | $1.19 | 59% |
CDnow | CDNW | $21.63 | 7% | $1.38 | 35% |
Open Market | OMKT | $13.00 | -5% | -$0.75 | 35% |
CyberCash | CYCH | $16.38 | 5% | $0.75 | 29% |
Network Associates | NETA | $63.13 | 5% | $2.75 | 19% |
Verio* | VRIO | $26.38 | 16% | $3.63 | 15% |
N2K | NTKI | $15.75 | 5% | $0.69 | 8% |
CheckPoint Software | CHKPF | $41.13 | -1% | -$0.63 | 1% |
IDT Corp | IDTC | $15.63 | 10% | $1.38 | -23% |
VocalTec | VOCLF | $12.75 | 5% | $0.63 | -38% |
Security Dynamics | SDTI | $21.75 | 12% | $2.25 | -39% |
* percent change from 1998 IPO (c) 1998 internet.com LLC
Our abacus tweaking reveals that of the 50 stocks in ISDEX, all but three
ended the year on a positive note. Forty of the 50 stocks beat the Dow and
NASDAQ hands down, outpacing the industrial-era and PC-era stocks in a race
now moving in Internet time where a second is sometimes a year.
Most
observers say that the Internet mania will end in 1999 but we expect some
healthy corrections in some of the sector and a renewed interest in other
parts.
Believers in market leaders can find justifications for the
valuations but have a hard time otherwise with stocks such as Amazon.com
(NASDAQ:AMZN), eBay (NASDAQ:EBAY) or Yahoo! (NASDAQ:YHOO) at the valuations
they’ve been bid up to. The only way the valuations make sense to us is if
any one of them goes out on a shopping spree and consolidates users,
traffic and revenue in a big way–which they very well may do in
1999.
AOL-pending acquisition Netscape raised the ante for everyone
and we think AOL is the one to beat in 1999. That doesn’t mean we endorse
AOL stock running like wildfire and consider its current valuation
approaching our estimated intrinsic value for the company given its current
outlook.
Network Solutions (NASDAQ:NSOL) ran on its monopoly status and
running head start as domain name registrar. Its challenges we see may be
in maintaining its central grasp of addressing if or when real names or
natural language type in addressing arrives.
Microsoft or Netscape could
blow out the meaning of a lot of “.com” if you can simply type in “stock
trades” and have the URL deliver an array of eager brokerages. Network
Solutions has invested in a startup called Centraal to mitigate some of
this. But owning the browser–as Microsoft and AOL-Scape do/will–is a far
better position in our view. Browsers still matter, despite the fact they
are “invisible” to users.
Ad networks like DoubleClick (NASDAQ:DCLK) and 24/7 (NASDAQ:TFSM) rode the
year well following strong IPO aftermarket burners. Each had triple digit
percent gains. Privately-held LinkExchange sold to Microsoft (NASDAQ:MSFT)
so watch for the heat to get turned up here next year.
Of all the
e-commerce enablers Broadvision (NASDAQ:BVSN) stands out with its rise to
prominence, up 418%, despite a rollercoaster dip. The targeted marketer
software maker hit the right note with advertisers wanting more
clickthrough and focus in the increasingly noisy ad space. BVSN rival Open
Market (NASDAQ:OMKT) disappointed Wall Street with a 35% rise year to
date.
Security software has been the dogs of Internet stocks all year, except for
Axent (NASDAQ:AXNT) with its 79% runup. But the biggies of just one and two
years ago, Security Dynamics (NASDAQ:SDTI) and Check Point Software
(NASDAQ:CHKPF) have done little to move all year. A lesson in how leaders
can go 1) unnoticed and 2) can run to stand still. In our view one of them
should have rolled up the security sector into a nice solution provider
offering, a one-stop security solution.
The only other dog,
chihuahua-class in its stock movement all year, looks like IP telephony.
Apparently the cost savings alone isn’t yet enough reason for Joe and Jane
Browser to use it.
Maybe it’s the outside threat that the browser could
place an icon on it for one-click calling? Or the AM-radio sounding talking
back and forth just doesn’t compare with point to point calls the
old-fashioned way. The area may be out of favor in 1998 yet there seems to
be a lot of potential here under the hood if it can just click with
consumers and businesses.
Tomorrow we tally our top 10 stocks we’ve
watched this year to see where they ended this amazing 12 months of
adrenaline and rollercoasters where Wall Street meets the Web.
Through December 21, Steve Harmon’s top 10 Internet
stocks to watch in 1998 were up 350%…for 1999 Steve Harmon’s Hot Stock
Watch will be available as a monthly e-newsletter. It will feature analysis
on the Hot Stocks, with a heads up about new movers who could do some
shaking on Wall Street — interested? put “HotWatch” in subject header and
email us now —yes, tell me more
about Steve Harmon’s HotWatch ’99
