The market is anxiously awaiting earnings from the old-line internet companies to see if their place in the internet world is slipping further or whether their businesses are stable and growing again.
Yahoo! (YHOO) has to demonstrate that its recent loss of market share to Google (GOOG) in the search market can be staunched. Amazon (AMZN) needs to prove that it can grow as fast as the overall e-commerce market with out cutting its margins to the bone. And, Ebay (EBAY) needs to demonstrate that is growth in is auction listings is not going to slow to a standstill.
In some ways, it does not matter. The stocks are probably permanently range bound.
With the exception of a small jump in late 2005 and a sell-off in the summer and fall of 2006, Yahoo! has traded between $28 and $38 over the last two years. The company trades for six times sales, about the same as Microsoft (MSFT). It is hard to imagine it moving back to $40. It just isn’t a growth stock any more.
Amazon’s stock is down about 10% over the last two years. It’s had a good run recently, but no one thinks it can grow much faster than the e-commerce market overall. Getting back to $49, where it traded in late 2005 is improbable.
Ebay’s growth come primarily from it PayPal online payment system. The stock is down almost 30% over two years, and getting back to where it traded in early 2006 ain’t going to happen.
What gives? The companies are no longer in the "growth" category. They have gone to Microsoft-ville. Nice companies. Modest revenue expansion. No big upside.
Ebay’s revenue went from $1.2 billion in 2002 to $3.3 billion in 2004. Yahoo!’s went from $953 million to $3.6 billion over that same period. Amazon rose from $3.9 billion to $6.9 billion.
That magnitude of revenue increase is behind all of them. They need to start paying out dividends. Microsoft (MSFT) did.
Douglas A. McIntyre can be reached at [email protected]. He does not own securities in companies that he writes about.
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