The euphoria surrounding technology stocks continued unabated in the final week of 1999, as the Nasdaq closed the year with an astounding gain of more than 85 percent, the best one-year performance by a major U.S. stock index in history.
Of course, many of the biggest Internet names like Yahoo! (Nasdaq: YHOO) and CMGI (Nasdaq: CMGI) and new issues like Internet Capital Group (Nasdaq: ICGE) and Commerce One (Nasdaq: CMRC) racked up even more stellar gains. The question now is whether the good times will continue.
While the market clearly seems overheated, it looks like money is going to keep pouring into technology stocks. Now that the Y2K problem has been successfully fought off, investors have yet another reason to buy into high-flying stocks.
In 1998, Henry Blodget’s $400 pre-split price target for Amazon.com turned numerous heads. In 1999, both Qualcomm and Commerce One received a $1,000 pre-split price target in December, and this kind of thing no longer seems so outlandish, although it probably should.
So the good times should continue for now, but keep an eye on earnings reports from online retailers. The holiday season was supposed to be a huge one for e-commerce, and some e-commerce stocks may be priced for perfection. That means any kind of revenue (as opposed to “earnings”) disappointment could lead to a brutal sell off.
Meanwhile, the initial public offering market should continue to make noise in 2000, with destination site AltaVista, online grocer HomeGrocer.com and Onvia.com, which sells products and services to small businesses, among the notable names that have already filed to go public. Get ready for some more fireworks.