SAN FRANCISCO (08/25/2000) - Things are looking up. The global economy is strengthening relative to its performance in the past few years, and the U.S. economy continues to move onward and upward at a steady pace. Investor sentiment reflects this. The Nasdaq composite index has maintained a 10-day winning streak, ending Thursday up 1.05 percent, or 42.27, to 4053.28. The Dow also had a strong day, rising 0.34 percent, or 38.09 points, to close at 11182.74. TheStreet.com Inc. (TSCM) 's Internet index likewise enjoyed a boost, rising 1.42 percent, or 11.27 points, to 802.21.
Upgrades and Other Good News
W.R. Hambrecht's Prakesh Patel upgraded VA Linux Systems Inc. (LNUX) to a "strong buy." The stock was up $6.87, or 18.52 percent, to close at $44. The open-source software company scored a higher revenue growth rate, better gross margins and faster movement toward profitability than expected. Other open-source companies rose in sympathy. Red Hat Inc. (RHAT) rose $1.94, or 8.49 percent, to close at $24.75. Caldera Systems rose 9 cents, or 1.7 percent, to close at $5.59.
Sprint PCS Group was up 12 cents, or 0.26 percent, to close at $48. Hambrecht's Peter Friedland, who rates the Sprint wireless unit a "strong buy," says he expects it to outperform the S&P 500 for the next six months. The wireless service provider recently launched its Wireless Web for Business, which Friedland says will include "a full suite of wireless data services focused on business customers." This would put it ahead of other domestic wireless carriers, according to Friedland, who says Sprint offers the most extensive wireless services in the domestic market.
USABancShares.com (USAB) shot up 34 cents, or 9.48 percent, to close at $3.96 after announcing an agreement with Yahoo (YHOO) to offer a co-branded version of Yahoo's FinanceVision. Yahoo is trading up $6, or 4.48 percent, to close at $139.81.
The semiconductor industry got a boost Thursday when A.G. Edwards (AGE) analyst Christopher Chaney revised his growth estimates for the segment to 40 percent from 32 percent for the year. Chaney said the strengthening world economy - particularly the Asia-Pacific region - is fueling record demand in this sector.
Chaney then mentioned a few of his picks for the sector: Intel (INTC) , which was down 37 cents, or 0.5 percent, to $74.25; Texas Instruments (TXN) , which fell $1.69, or 2.49 percent, to $69.92; Microsemi (MSCC) , which slipped 75 cents, or 1.89 percent, to $38.87; and Analog Devices (ADI) , which slid $1.75, or 1.77 percent, to $96.75.
Merrill (MER) Lynch analyst Henry Blodget reiterated his belief that investor sentiment toward Internet stocks continues to improve. He said that of the two drivers of stock prices, performance and fundamentals, performance appears to be winning. He wrote: "Over the last few weeks, some potentially negative news has hit the market but has not driven the stocks down further - for example, Amazon missed consensus revenue, an Amazon partner company went belly-up, and we said we believe there may not be as much upside to Yahoo's revenue in Q3 as in the past. Minor good news, on the other hand, has lifted the stocks. We believe, therefore, that sentiment toward the group is improving."
Blodget's picks are AOL, which was up $1.12 Thursday, or 1.91 percent, to $59.87; Amazon, which rose 56 cents, or 1.45 percent, to $39.37; Yahoo, which showed a gain of $6, or 4.48 percent, to $139.81; DoubleClick (DCLK) , which increased by $2.75, or 7.26 percent, to $40.62; eBay (EBAY) , which rose $3.56, or 6.16 percent, to $61.37; and Homestore, which went up $5.62, or 13.7 percent, to $46.69.
Pick-Ups
Goldman Sachs analyst Vik Mehta began coverage of Palm on his "recommend" list.
The handheld device maker's stock rose $2, or 5.27 percent, to close at $39.94.
Credit Suisse First Boston analyst David Sturtz on Tuesday initiated coverage of Proxicom (PXCM) , which was down $3.69, or 12.34 percent, to $26.19, with a "buy" rating. Sturtz also took on Scient (BSX) , which dropped $1.75, or 4.64 percent, to $35.94, as a "hold" - meaning he'll cover it, but just don't buy it. Thanks, Dave.
Mixed Bag
RealNetworks (RNWK) continued its slide, ending its day down $2.94, or 4.67 percent, to close at $47.19, even after Hambrecht & Quist analyst Bill Lennan blasted an unflattering Fortune magazine article about the company. Lennan, who rates the stock a "buy," said the article, "Is Rob Glaser for Real?" revealed a "limited understanding of RealNetworks, when it asserted 'peer-to-peer' file-sharing schemes like Napster and Gnutella will render RealNetwork 'a virtual dinosaur.' " Next Level Communications (NXTV) dove $49.81, or 54.4 percent, to close at $41.75, after Lehman Brothers analyst Steven Levy cut its rating from "buy" to "neutral." Apparently the phone-equipment maker's top customer, Qwest Communications, is not coming through with its forecasted demand, pushing Next Level's revenue down for the near term. Broadcom (BRCM) , one of New Level's main chip suppliers, held its ground, increasing $3.70, or 1.37 percent, to close at $273.62.