Internet Stocks Put on After-Market Burners

In recent weeks there have been a number of media stories about the poor
performance of Internet stocks in the long run.

Through May and most of June, many analysts and commentators, seizing
upon the slump that gripped the Internet sector in mid-April, were quick
to point out that most Internet stocks were trading below their initial
IPO prices.

While that certainly was true then, it isn’t today. A look at the
Internet Stock Report’s IPODEX shows that
through last Friday, shares of more than half the Internet companies
that launched IPOs in the past three months were trading above their
first-day closing prices.

Specifically, 45 of the 75 companies listed in the IPODEX were up at the
end of Friday’s market session relative to their closing prices on the
day of their IPOs. (I’m not counting Liquid Audio, which actually went
public on Friday.)

Compare that to four weeks ago, when a mere 17 of 57 companies listed in
the IPODEX were trading above their first-day close. That’s as good an
indication as any that Internet stocks have rebounded strongly from the
slump that gripped the sector this spring.

Some Internet shares are moving at more than twice their debut closing
price. Below is a list of the highest flyers among the newest crop of
stocks, along with their IPO date (you can find full details in IPODEX):

  • F5 Networks (June 4) – 241%
  • (June 18) – 186%
  • (June 25) – 148%
  • High Speed Access (June 4) – 134%
  • Digital Island (June 29) – 121%
  • (June 18) – 119%
  • Wit Capital (June 4) – 117%
  • StarMedia Network (May 26) – 100%
  • Proxicom (April 20) 97%
  • (June 24) – 91%

The star here is F5 Networks, a Seattle-based vendor of server load
balancing software. Two things are contributing to its recent soaring
performance: 1) The market’s love-fest with networking-related stocks,
and 2) The company’s shares had plenty of room to move up.

F5 Networks priced at $10 a share, and closed its first day of trading
at $14.88. That’s a 49% increase, which is close to the average
first-day performance for all June Internet IPOs. Juniper Networks, in
contrast, had one of the best debuts of the year, closing on June 25 at
$97.88, a 188% gain over the $34 offer price. As of Friday the company
was up to $132.75, an increase of 36% over the 6/25 close.

And while F5 Networks shares have been climbing in recent day, Juniper
has been coming down from its high of $162 per share on June 30. Juniper
got all the press attention, but as of Friday F5 Networks has a more
successful stock – shares are trading at more than five times the offer
price, while Juniper’s are trading at almost four times their offer

(F5 shares continued to climb Monday, opening at $55, while Juniper has
fallen below $130.)

The lesson here is that while a hot IPO debut catches attention and can
make some quick money for stock flippers, there are some success storiesunfolding beyond the first-day headlines.

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