Summer Slowdown Begins: ISDEX Mixes Pops and Drops

Those April showers that come in May basically wiped out the gains ISDEX made as a group all last month as I take a look at an overdue Dow which gained most of its 18% run this year.

For comparison, ISDEX rollercoastered up and then back down in April, ending about where it began. A wider look, however, showed ISDEX up 91% year to date through May 4.
The psycho-drama of the Dow breaking the 11,000 mark for the first time ever just a few days ago both encouraged and spooked the market. After all, investors were seemingly only yesterday dreaming of a Dow 10,000.

The underlying truth according to my analysis of the numbers showed the Dow up a helthy 18.6% since 12/31/98. Of that, 11.2% came in the past month, most of that the past week.

The net effect was money shifting to the industrials and away from technology as the old-line blue chips finally got some due. The irony is that popping through the 11,000 mark also gave the market nervousness which corrected stocks across the board May 4.

That’s why we see all the indices off. In the Internet stock space I think the rollercoaster drop experienced April 16 and in the ensuing days should have seen more of a correction. That was what I wrote during the time, that we could see another 10% to 15% drop–which didn’t come until now.

Some of the softness in the sector can be blamed on as one of the ‘blue chip’ Internet stocks that investors have grown a little tired waiting for earnings on.

While I agree that AMZN was ahead of itself in valuation I also think that Amazon is aiming a little further out than being a profitable book store.

If it reaches the ‘Wal Mart of the Web’ status that I think it could, not this year but within 36 to 48 months, then I can see how AMZN follows AOL’s (NYSE:AOL – news) path.

Remember that AOL posted a decade of losses as it grew to meet the opportunity. On Amazon’s horizon I think it may have to up the ante and expand its offerings to be anything and everything for sale and in any and every conceivable method from auctions, classifieds, affiliates, referrals.

At current valutaion levels I think AMZN looks fairly priced (if) until some good news comes from the firm.
Given the market’s bear in the air scent it’s easy to overlook that 20 of the 50 stocks in ISDEX are up single and double-digit since March 31.

Among the news:

99.05.04 – (NASDAQ:EGGS – news) posts strong results in its first full year as a 100% Web-based etailer with $148.7 million revenue vs. $81.3 million in fiscal 1998. Gross margin gets fatter at 10.1% vs. 8% in the previous quarter. Losses continued as the company spent heavily on sales and marketing, losses were $34.4 million vs. $50.2 million in fiscal year 1998.

99.05.04 – (NASDAQ:INSP – news) inks a deal with to distribute content on InfoSpace’s Web network which servers more than 1,500 Web sites.

99.05.03 – (NASDAQ:AMZN – news) loses 12% to $150 15/16 per share after reporting its latest quarter results last week when founder Jeff Bezos said he plans on spending heavily to grow the etailer. AMZN shares are off about 30% the past two weeks. A couple of key observations: 1) I think Amazon is in a high-growth, high-spend mode and 2) I think Amazon’s model may be in transition to more referral-based sales rather than “touch the merchandise” sales. A more Web-enabled model.

99.04.30 – CDNow (NASDAQ:CDNW – news) jumps 22% to $19.375 per share on rumor that the Web-based music e-tailer could be the target of a takeover by Time Warner or Bertelsmann. CDNow-N2K merged and together have one of the largest music selling operations on the Web.

99.04.30 – Marimba (NASDAQ:MRBA – news) goes public with 4 million shares at $20, opens at $59,shoots up to $66.50 and closes at $60.75. The software management firm seems to have outlived the hype of push.

My analysis indicates Marimba could generate more than $50 million sales in 2001. That yields an aggressive 20x multiple for its current market cap,although I suspect traders could push this one up further that today’s run.

99.04.27 – AOL (NYSE:AOL – news) beats the Street with better-than-expected results, posting $0.11 EPS vs. First Call’s target range of $0.07 to $0.10. Overall net income is $117 million for its third quarter with a record $1.3 billion revenue. True to the expression, investors sell on news as AOL shares end the day down 5% to $153 per share, with some after-hours trading trending down slightly also.

99.04.27 – eBay (NASDAQ:EBAY – news) revenue jumps 469% to $34 million while its net income is $9.5 million or $0.05 EPS. Analyst consensus was $0.02. The personal trading community auction traffic grew 69% to 22.9 million auctions while registered users more than doubled to 3.8 million. Despite the valuation question

I’ve always had for EBAY its results continue to impress me.
99.04.21 – E*TRADE (NASDAQ:EGRP – news) reports better-than-expected at a loss of $0.12 per share vs. an expected $0.17 from consensus estimates. Online stock trades soar to 70,000 per day.Accounts jump 39% vs. the previous quarter to 909,000 with $21.1 billion assets managed. EGRP closes up 22% at $89.8125 per share.

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