Signs of A Bottom

Despite the continued volatility of the tech-heavy Nasdaq in recent days, there are signs that Internet stocks are bottoming out – at least some sectors.

According to statistics from’s Internet StockTracker weekly newsletter, two of the 12 Internet sectors posted slight average gains for the week of trading ended Wednesday, the first time in more than a month that any sectors have gotten out of the red.

And unlike two weeks ago, when only 45 of 345 Internet stocks tracked by the newsletter posted weekly gains, 120 ‘Net stocks moved up in the past week.

What might surprise some investors is that one of the two sectors gaining in the recent week was E-tailers, which posted an average gain of 1.2 percent, just behind the Consultants/Designers sector, which rose 1.5 percent.

In addition, five other sectors each lost less than 1 percent. Here are the averages for each of the 12 sectors in the short week (no market on Good Friday) ended Wednesday:

Consultants/Designers 1.5%
E-tailers 1.2%
Search/Portals -0.4%
Content/Communities -0.5%
Advertising/Marketing -0.6%
ISPs/Access Providers -0.7%
Financial Services -1.0
Performance Software -2.8%
Security -3.8%
Speed/Bandwidth -5.5%
E-Commerce Enablers -8.1%
Internet Services -9.4%

While it’s unusual to see e-tailers near the top of any list other than companies facing pending extinction, the reason seems clear: It’s hard for many of the stocks in the group to fall any further. Thirty-two of the 41 e-tail stocks listed in the newsletter were selling for less than $10 through Wednesday, while 22 were below $5, and 13 were below $3 per share.

Leading the group was eToys (ETYS), the online toyseller whose shares have fallen more than virtually any other Internet company in recent months. eToys gained more than 50% thanks to the unveiling of an $8 million summer advertising campaign. (It was a short-lived rally, however; ETYS dropped 25 percent on Thursday to 7 1/8, and was trading early Friday afternoon at $8 per share, or 91 percent below its all-time high of $86 per share set last October.)

Other sectors still have plenty of room to head south, perhaps none more so than E-commerce Enablers, once home of the $300 per share B2B stock. Of the 39 Internet stocks that dropped at least 20 percent in the past week, 10 were from the E-commerce Enabler sector. And of the 51 stocks listed in the sector, only 12 managed to gain. It’s hard to regain altitude with the new reality of overvaluation weighing you down.

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