Stock Analysts Cut E-Commerce Expectations

In the days since the terrorist attacks on New York City and Washington, D.C., analysts have become more cautious about business in general and e-commerce in particular, warning that the stocks will struggle until it is clear when the economy and consumer confidence will pick up.

Even before the September 11th attacks disrupted business and unsettled consumers, analysts were generally pessimistic about the bulk of e-commerce stocks, which have fallen along with technology spending.

Jefferies & Company analyst Michael Legg, who has given most e-tail issues a hold rating for some time, further lowered earnings estimates for online travel site Priceline (Nasdaq: PCLN) and Internet advertising agency DoubleClick (Nasdaq: DCLK) after the attacks.

DoubleClick “regardless of September 11th has been weakened by a difficult advertising environment,” Legg told the E-Commerce Times.

Legg added that Priceline, like other travel-related companies, is “obviously getting hit hard” by a falloff in travel demand. Before September 11th, he said, Priceline “had a successful turnaround going on.”

Goldman Issues Retreat

Goldman Sachs analyst Anthony Noto, long a cheerleader for many e-tail stocks, on Monday was said to have lowered his outlook for the e-commerce industry.

Noto now reportedly expects e-commerce revenue to grow by 25 percent this year, down from a previously projected 35 to 40 percent.

Goldman Sachs was said to have lowered estimates for Amazon.com (Nasdaq: AMZN), 1-800-Flowers.com (Nasdaq: FLWS), CNET Networks (Nasdaq: CNET), Homestore.com (Nasdaq: HOMS) and Yahoo! (Nasdaq: YHOO) in light of the slowdown in advertising spending and expected falloff in business.

Noto reportedly reduced his forecast for online ad spending this year by 8 percent to US$7.6 billion, down 6 percent from last year. For 2002, he reportedly expects online ad spending to rise 10 percent, rather than the 15 percent initially thought.

Buy on Travel Stocks

At least one analyst is taking a more positive view of tech travel stocks. Tom Underwood at Legg Mason went so far as to issue buy recommendations on Travelocity (Nasdaq: TVLY), Expedia (Nasdaq: EXPE) and Sabre Holdings (NYSE: TSG) after the companies’ shares plunged. Underwood rates Priceline market perform.

“I have confidence that all of those companies, and Priceline, will be profitable next year, given what we know now,” Underwood told the E-Commerce Times.

Barring another terrorist attack in the United States, Underwood said, business should pick up, and “the stocks are cheap on a projected price-to-earnings basis, especially relative to how those earnings are going to grow.”

Moving Forward

Online travel companies, said Underwood, are not heavily dependent on advertising sales to boost revenue, but rather generate the bulk of their sales from transaction volume and the markup value of travel products.

Goldman’s Noto was reported to have singled out Priceline as potentially attractive.

In morning trading Tuesday, key e-tailers were having mixed results trying to eke out some kind of recovery from days of being battered along with the rest of the market. Yahoo! was up 60 cents — or 6 percent — at $9.85, and Priceline was 5 cents higher at $2.57, but Amazon was down 3 cents at $7.43.

Homestore, which rose as high as $9.70 at the outset of trading, had fallen back to $9.15.