E-tailers Sink as Goldman Cuts Ratings

Online retailers sank in early trading Monday, brought down by news that eToys (Nasdaq: ETYS) expects aweak 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 AnthonyNoto said he lowered his rating on the company to market performer frommarket outperformer, after the company “indicated its ability to raisecapital is uncertain.”

Likewise, Ashford.com (Nasdaq: ASFD) was down5/32 at 7/8, after Noto lowered earnings estimates for the luxury goodse-tailer. “Ashford has a good core niche business, but for the quarter willnot likely have sufficient marketing dollars or history of marketingeffectiveness 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$950million to $1.05 billion for the quarter, he wrote.

Overall, Noto recommended investors “underweight” their holdings in thee-commerce sector. The analyst said he had previously maintained favorable ratingson 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 ourunfavorable outlook and our ratings, we are aligning both our stock priceoutlook and our ratings to clearly communicate our investment opinion,” Noto wrote.

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