It isn't exactly like old times, but key Internet stocks posted some hefty gains Wednesday to pace the Nasdaq market's rebound.
Leading the pack: EBay Inc. (ticker symbol: EBAY), which soared $6.35, or 10%, to $69.50 on the heels of a fresh recommendation from analyst Henry Blodget at Merrill Lynch & Co.
Other big gainers, in percentage terms, included Yahoo (YHOO), up $2.93, or 19%, to $18.49; CNet Networks (CNET), up $1.69, or 18%, to $11.03; and RealNetworks (RNWK), up $1.59, or 15%, to $11.89.
An upbeat outlook from AOL Time Warner (AOL), which jumped $2.96 to $52.80, may have helped the sector.
As for EBay, Blodget raised his second-quarter earnings estimate for the firm by 11% and his 2001 estimate by 10%.
The No. 1 online auctioneer is "executing well in a horrendous environment," Blodget said in an interview. "Investors are paying up for numerous positives in the business--strong expansion and growth opportunities, great margins, likely upside to estimates," he wrote in a report to clients.
Raising profit forecasts for an Internet company is rare these days on Wall Street. Hundreds of Web-based firms have folded over the last year.
EBay is in part a beneficiary of the collapse of many smaller Net peers, Blodget said: The firm is one of the few remaining high-growth stories in a slowing economy, whereas 18 months ago every Net company was believed to have high growth prospects.
"Investors are looking for investments of last resort where they think there may be some stability," said Steven Tuen, manager of the Kinetics Internet and Kinetics Internet Emerging Growth funds.
EBay has turned a profit in every quarter since first selling shares to the public in 1998. On average, analysts surveyed by Thomson Financial expect the firm to earn 40 cents a share this year and 67 cents a share next year.
Blodget now expects EBay to earn 10 cents a share this quarter on sales of $168 million. He expects 44 cents for the year.
The stock has already surged 111% year to date, and now is at its highest since September.
At Wednesday's close EBay shares are priced at 174 times this year's expected earnings--demonstrating that, despite the tech-stock crash of the last year, some investors still are willing to pay lofty price-to-earnings ratios for high-growth companies.
Even so, "If I were an investor out there with a sizable holding in EBay, I'd cash out" because the stock isn't likely to rise much more, said Tuen, who said he sold most of his EBay shares a year ago.
That's a minority view among analysts, however: Twenty-four brokerage analysts rate EBay a "buy," compared with five "holds" and one "sell."
Net-related stocks overall remain far below their prices of early this year--and dramatically below their peak prices reached in 1999 or 2000.
The Interactive Week index of 50 Net stocks rose 3.4% Wednesday to 173.48, but is down 38% year to date. From its peak in March 2000 the index has lost 74.5%.
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Shares of online auctioneer EBay have rebounded 111% this year amid continuing optimism about its earnings growth prospects. By contrast, the Interactive Week index of 50 Net-related shares is down 38% year to date.