Will E-Commerce Stocks Ever Rebound?

In October, about six months into the dot-com stock downturn, the E-Commerce Times asked industry analysts for their prognosis of several of e-commerce’s most prominent stocks. The stocks had fallen so low, we could not help wondering, “When Will E-Commerce Stocks Rebound?“

We’re still wondering.

In fact, we’re wondering why we had been so worried by the closing prices of these stocks on October 6th. (Amazon at US$32? Who’d have thought?!)

At the end of trading Tuesday, most of the stocks evaluated were at least 50 percent off those depressed values.

Analysts said in October that prices in the e-commerce sector figured to get worse before they got better. True enough. However, as we revisit several big-name e-commerce companies, the issue has changed dramatically — from “When will they rebound?” to “Will they rebound at all?”

Amazon

Then: $31.56.Now: $12.50.Decline: 60.3 percent.

Although many analysts still predict Amazon will reach profitability by the end of 2001, Amazon’s stock has plummeted on the heels of slower than expected growth. Last week, Prudential Securities downgraded the stock to sell and slashed its price target to $9 from $20.

“We still think the company is executing on the path to profitability, but the growth rate the market was looking for was in the 50 to 60 percent range, and they came in at 42 percent,” Bear Stearns analyst Jeffrey Fieler told the E-Commerce Times. “The go forward rate is beneath our expectations and market expectations as well — our price target is now set to $30.”

Added Feiler: “Amazon’s biggest challenge is to continue to improve operational efficiency. They need to drive their percentage of sales spent on fulfillment to under 10 percent to reach profitability.”

eBay

Then: $59.44.Now: $44.56.Decline: 25.0 percent.

eBay’s fourth-quarter financial results convincingly beat analyst estimates ahead of a first quarter that is traditionally eBay’s strongest. Even though eBay stock is down 25 percent since October, analysts continue to see eBay as one of e-commerce’s strongest survivors, with virtually no direct competitors.

“They remain probably the most solid e-commerce company around,” Merrill Lynch analyst Dan Good told the E-Commerce Times. “We expect them to have a solid quarter with year-over-year revenue growth at better than 50 percent. The trick for them is to extract a greater percentage of gross merchandise sales for revenue.”

Priceline

Then: $5.56.Now: $2.72.Decline: 51.1 percent.

Last week, Priceline said it expects profitability by the second quarter of 2001, but because the announcement came with a report of a wider-than-expected fourth-quarter loss, investors have remained skeptical.

“Things have changed pretty radically as a result of the lagging weakness in the core airline business, as well as key management departures and the shut down of its affiliates,” Good said. “There seems to be no consistency on any of the analyst estimates, which is a function of no guidance at all from company.”

Buy.com

Then: $2.56.Now: 53 cents.Decline: 79.3 percent.

With the resignations of its chief executive officer and chief financial officer last week, the struggles continued for Buy.com. Despite having ranked as high as second in the U.S. to Amazon in online sales, Buy.com was weak on its revenue line in Q4, though somewhat ahead of expectations on earnings per share.

Good said that Buy.com took down their estimates across the board for 2001 and that Bear Stearns has suspended its coverage of the stock.

Webvan

Then: $1.75.Now: 34 cents.Decline: 80.6 percent.

Webvan has been in the news frequently of late, with its abandonment of the Dallas, Texas market, layoffs, the resignation of its founder and a reported fourth-quarter loss of 23 cents per share. The online grocer is in danger of being delisted from the Nasdaq, but the company continues to fight for survival.

“Their cash is probably okay,” Good said. “Their growth rate is not clear. The real issue is that their demand seems to be lagging in some of their markets.”

Yahoo!

Then: $81.25.Now: $26.56.Decline: 67.3 percent.

Yahoo! has been swiftly moving to diversify its revenue streams and decrease its dependence on online advertising. After eBay, Yahoo! drew perhaps the most positive assessment of the stocks we asked analysts to evaluate.

“Our price target [on Yahoo!] is $76,” Fieler said. “I expect a re-acceleration of their top-line growth rate from 10-to-15 percent for 2001 to 30-to-35 percent in 2002. They need to develop measurement tools to prove what they can deliver to advertisers and find additional ways to modify their platform.”