Peter Kafka

Recent Posts by Peter Kafka

Citi: Worst May Be Over for Internet Stocks

inflating-balloonMore fuel for the “things may not be getting worse, and may even be getting a little bit better” meme that I’ve been detecting (or perhaps promulgating ) recently: Citigroup (C) analyst Mark Mahaney notes that the Internet stocks he covers are up an average of 28 percent so far this year while the tech-heavy NASDAQ is only up seven percent and the broader S&P is down two percent.

Big winners so far include Blue Nile (NILE), up 73 percent; Expedia (EXPE) up 68 percent; and Amazon (AMZN) up 44 percent. Moderate winners, comparatively speaking, include Google (GOOG) up 27 percent; eBAY (EBAY) up 21 percent; and Yahoo (YHOO) up 22 percdent.

Here’s the full breakdown of the 16 Internet stocks Mahaney covers (click table below to enlarge):

mahaney-web-chart

I usually steer well clear of opining/guessing about stock prices and the like, but I think it’s worth considering Mahaney’s note, both for his explanation and for the potential impact of the stocks’ run.

The explanation: Part of this is basic what-goes-down-must-go-up market yo-yoing–Internet stocks got pummeled worse than the rest of the market last year so it’s easier for them to bounce back. But Mahaney also thinks that most of the stocks he follows are going to turn in the worst performance, earnings-wise, in the quarter we’re in now. Investors like that because it means that things can only get better.

The impact: Remember the old days when public companies could use their shares as currency to acquire smaller companies? Well, we’re not headed back there quite yet. But a sustained rally sure could kick-start the M&A market, which will make things more interesting for the likes of me, at the very least.

[Image credit: joshmadison]


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I think the NSA has a job to do and we need the NSA. But as (physicist) Robert Oppenheimer said, “When you see something that is technically sweet, you go ahead and do it and argue about what to do about it only after you’ve had your technical success. That is the way it was with the atomic bomb.”

— Phil Zimmerman, PGP inventor and Silent Circle co-founder, in an interview with Om Malik