In its youth, as it struggled for acceptance, e-commerce could count on the spirited support of a handful of influential stock analysts who were credited with — and then blamed for — creating the tech-stock bubble.
One by one, however, those cheerleaders have put away their pom-poms. Now, as e-commerce matures and tries to prove it is an industry to be taken seriously, it faces the prospect of doing so without the benefit of a team of cheerleaders egging on investors and consumers.
“The type of cheerleading that led to the dot-com bubble is a thing of the past,” Kent Womack, a professor at the Amos Tuck School of Business at Dartmouth College, told the E-Commerce Times. “Analysts got too powerful, and they’ve been forced to back off considerably since things came back to earth.”
While some critics blame the first wave of dot-com believers for pumping up the bubble and helping to make the collapse of overinflated stock prices inevitable, others say they played a critical role in establishing the credibility of a fledgling industry.
“They had a role to play,” Womack said. “They just got caught up like everyone else did.”
In fact, analysts became household names as the dot-com craze gained steam.
Running of the Bulls
For example, Henry Blodget’s name became synonomous with the dot-com expansion when, as a relatively obscure analyst with CIBC Oppenheimer, he set a US$400 price target for Amazon — and the e-tailer hit that target not long afterward. Blodget later moved to Merrill Lynch, where he set equally lofty targets for Yahoo! and other e-commerce favorites.
Blodget left the stock analysis business early this year, taking a reported $5 million buyout from the brokerage giant. But he was far from alone in pumping up the stock bubble. And some of his fellow pom-pom wavers still believe.
Mary Meeker, who had a hand in several high-profile dot-com IPOs, including those of Priceline.com (Nasdaq: PCLN) and now-troubled Homestore.com, also became one of the industry’s prominent flag bearers.
Meeker’s profile — she was named one of the 50 most influential businesswomen in the United States by Fortune magazine at one point — was somewhat diminished by the Nasdaq collapse. But she helped boost EBay (Nasdaq: EBAY) shares as recently as late February by issuing a “strong buy” recommendation on the auction giant.
But by and large, stock analysts are more likely to temper positive remarks or to qualify upbeat predictions with a host of caveats. For instance, Morningstar.com analyst David Kathman, who covers Amazon.com, EBay and other dot-com stocks, peppered his praise of Amazon’s first-ever profit with concerns about growth rates.
And Holly Becker, another Internet bull during the run-up, has taken a much more dour approach of late, issuing cautionary if not alarmist research notes on both Amazon.com and AOL in recent weeks.
Six of One
So what’s changed, the analysts or the industry?
The answer seems to be: a little of both. The number of industry and equity analysts focused on e-commerce certainly has shrunk amid the shakeout. Reports predicting runaway e-commerce growth are now fewer and farther between.
Meanwhile, Forrester Research analyst Christopher Kelley told the E-Commerce Times that e-tail is becoming part of consumers’ daily lives but is seeing its distinction from traditional retail shrink every day.
“There is still reason to be optimistic about e-commerce,” Kelley said. “It’s just not going to look like what we thought it would a few years ago.”