When Will E-Commerce Stocks Rebound? (Cont.)

Goldman Sachs analyst Anthony Noto wrote in a research note last month that his firm had downgraded Priceline because overall conditions for online air ticketing businesses are not favorable.

“We’re not downgrading the stock because they missed the quarter,” Noto wrote. “We’re downgrading because of why they missed the quarter.”

Priceline suffered two additional setbacks Thursday when licensees WebHouse Club, which sold groceries and gasoline, and Perfect Yardsale announced they were ceasing operations.

Travelocity (Friday close: $10 1/2)

Suffering from the overall lag in airline ticket sales, Travelocity (TVLY) sits near its 52-week low, compared to a high of $51.875. Donaldson Lufkin and Jenrette Securities analyst Jake Fuller has a 12-month price target of $25 for Travelocity’s stock.

Fuller contended that Travelocity and Expedia have established themselves in an industry that has grown from $7 billion last year to a projected total of $12 billion this year, with the $40 billion mark looming in the next few years.

“I think it’ll be very hard to dislodge the two that are already out there with strong market positions,” Fuller said. “It’s going to be very expensive for new competitors to come in and grab significant market share.”

Though Fuller said there are about 800 sites in the online ticketing business, the two airline-sponsored sites most feared by once-and-future Travelocity investors — Orbitz and Hotwire — have not launched yet. Fuller said that until those sites begin operations, Travelocity’s stock may lay flat as investors hedge.

“Right now you’re fighting press releases, and that’s hard to do,” Fuller said. (Friday close: $2 9/16)

Even though, priced at $35 7/16 per share as recently as February, has lost more than 90 percent of its value, the e-tailer is still a major e-commerce player. Good said that’s projected revenue of $842 million this year and $1.1 billion in 2001 is second only to Amazon.

“I think the company is doing some exciting things,” Good said. “They’re continuing to sign wireless deals, continuing to make themselves present all over the place.”

Good said that approaching Christmas, the stock could move “a little higher,” but he cautioned that the stock is affected seasonally like any retailer and could see some post-holiday blahs.

“What they need to prove to investors is that the margins are going to come along and improve,” Good said.

Webvan (Friday close: $1 3/4)

Also down more than 90 percent from its high of $34, Webvan has a “real opportunity to become a massive company” in two to four years, Good said. However, he thinks that the Web-based grocery deliverer’s stock will sit near the current level for some time.

Good praised the Webvan board, saying that “you don’t get a much better group of individuals.” But he added that Webvan has an additional obstacle that other e-tailers do not face, which is that it has to establish a physical presence in every market.

“It’s just a Herculean task what they’re trying to do, which is defining the last mile of e-commerce,” Good said.

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