In Friday’s Morning Report, Tom Taulli notes that through Thursday, the
ISDEX is down just 1.7 percent for the past week, a clear sign that Internet stocks are beginning to stabilize.
If you take a look at what’s been happening since Tuesday, the situation
looks even more promising. If the ISDEX can hang on for the rest of the
day to the impressive gains it has made Friday morning – up 18.88, or
4.38 percent through noon — it will close with a gain for the fourth day in a row.
While that doesn’t necessarily mean the beginning of a rally – concerns
about interest rates, the ad revenue model and exorbitantly high
valuations haven’t disappeared — it seems to indicate the free-fall is
over.
And a nasty plunge it has been for a number of ISDEX companies. Through
Wednesday’s close, 20 of the 50 companies in the ISDEX lost at least
one-third of their value in the past month alone.
The biggest losers have been Sportsline USA (SPLN)(-56.74%), Healtheon (HLTH)
(-54.28), iVillage (IVIL)(-46.24%) and Concentric Network (CNCX)(-46.14%).
All told, 47 of the 50 ISDEX stocks have fallen since July 14.
Which means, of course, that three have gained ground in the face of the
recent slump, and not just a little bit, either.
Firewall vendor Check Point Software (CHKP) is up 20.63% over the past month,
while business application software maker Broadvision’s (BVSN) stock has risen
18.76%.
But the biggest gainer has been Internet backbone router vendor Juniper
Networks (JNPR), which since July 14 had climbed 40.37% through Wednesday.
Juniper made a huge splash with its June 25 IPO, closing the day at
$98.88, a 191% gain over the $34 offer price. As have many networking
stocks, Juniper’s IPO benefited from investor fervor for infrastructure
plays.
More impressive than its market debut has been Juniper’s after-market
performance, which has defied the quick-burnout pattern of many recent
Internet IPOs that fade after only a few days of trading. Like a rocket
ship defying the pull of gravity from an imploding planet, Juniper just
kept climbing through July and into this month while other Internet
stocks wilted.
On Friday shares of JNPR smashed through the $200 barrier, soaring
$11.75 by 1 p.m. to hit $208.75.
Investors are showing unusual confidence in a company whose chief rival
is networking giant Cisco Systems Inc. (CSCO) Indeed, Juniper’s recently announced
Q2 earnings of $17.6 million are dwarfed by Cisco’s $3.5 billion in
sales during the same quarter.
Juniper, though, is taking on Cisco in the high-end switching technology
market, where Cisco is perceived as weak. Further, Juniper’s routing
devices are faster than Cisco’s, a critical selling point for ISPs
desperate for equipment that will allow them to handle more and more
traffic at faster speeds.
Don’t expect Juniper’s stock to remain in the stratosphere. Cisco has
been caught off-guard before, only to marshal its formidable resources
to counter against other competitors. It will do so again, and Juniper
shares will come down to a more realistic level. Still, the companylooks like a good long-term investment. Just not at $200 per share.
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