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Online retailers sank in early trading Monday, brought down by news that eToys (Nasdaq: ETYS) expects a weak quarter, as well as by analysts' downgrades at Goldman Sachs & Co.
eToys was down 3/4 at 9/32 in early morning trading. Goldman analyst Anthony Noto said he lowered his rating on the company to market performer from market outperformer, after the company "indicated its ability to raise capital is uncertain."
Likewise, Ashford.com (Nasdaq: ASFD) was down 5/32 at 7/8, after Noto lowered earnings estimates for the luxury goods e-tailer. "Ashford has a good core niche business, but for the quarter will not likely have sufficient marketing dollars or history of marketing effectiveness to achieve its sales objective," Noto wrote.
Webvan Group (Nasdaq: WBVN) was down 1/128 at 59/128 as Noto downgraded the online grocer to market performer, and took the stock off the firm's recommended list. The company, he said, "requires significant cash to continue operations beyond mid-2001."
Noto repeated a trading buy recommendation on Amazon.com, which nevertheless was down 2 at 20 7/8. "We continue to believe that Amazon is on track" to see revenue of US$950 million to $1.05 billion for the quarter, he wrote.
Overall, Noto recommended investors "underweight" their holdings in the e-commerce sector. The analyst said he had previously maintained favorable ratings on the stocks even though he saw the outlook for the sector as poor because "it seemed imprudent to downgrade at the bottom."
Now, however, "given the increased uncertainty and the disconnect of our
unfavorable outlook and our ratings, we are aligning both our stock price
outlook and our ratings to clearly communicate our investment opinion,"
Noto wrote.
