Hot e-commerce picks; AMD about-face

Technology analysts recommend e-commerce stocks
Written by Larry Barrett, Contributor

Despite the Nasdaq's pullback this week, leading technology analysts are recommending a handful of stocks that are built for the long haul. Not surprisingly, it's all about e-commerce.

PaineWebber analyst Jim Preissler said early reports suggest the past Christmas shopping season raked in between $10bn to $12bn (£6.2bn to £7.44bn) for e-commerce companies, meaning those companies providing the nuts and bolts to make online shopping work will be hot through 2000.

"While consumer demand was clearly high, another more important aspect was also clear," Preissler said in a research note. "Many of the merchants still need to make significant investments in both front-end and back-end infrastructure. We believe this presents a substantial investment opportunity for 2000 and beyond."

Despite the relative popularity of shopping online, consumers were vexed by the erratic service they received at some of the Internet's most popular shopping destinations.

In fact, a recent study conducted by Anderson Consulting said that 25 percent of all online transactions couldn't be processed due to a lack of reliability.

Where there's a problem, there's a long line of companies just waiting to solve it.

Preissler and other analysts are recommending a slew of e-commerce facilitators such as OpenMarket, CheckPoint Software, InfoSpace and CyberSource.

"Over the upcoming year many e-tailers and "clicks and mortar" retailers need to significantly update third e-commerce infrastructures," Preissler said. "Add to this the rush of companies moving online for the first time in order to not miss yet another big year and we believe 2000 could be a great year for e-commerce enabling companies."

Those of you who've seen the ups and downs of AMD shares in the past three years probably are afraid to hear this, but AMD stock is hot again.

Sure, AMD's notorious for being long on promise and short on execution, but there are some encouraging signs emanating from the Sunnyvale, California chipmaker.

Ashok Kumar, a longtime AMD critic and analyst at Piper Jaffray, actually upgraded the stock from a "neutral" recommendation to a "buy" this week.

In a research report titled "Does Jerry have his mojo back?," Kumar said he expects AMD to earn 5 cents a share in its fourth quarter on sales of about $1bn, well above most analysts' estimates.

First Call consensus expects AMD to post a loss of 1 cent a share in the quarter. The reference to CEO Jerry Sanders is clearly tongue-in-cheek as he has often drawn considerable ire from the analyst community for his perceived indifference and inability to get AMD shares back on track.

Oddly, bad news from Gateway may turn out to be a boon for AMD. The PC maker warned that it will miss analysts' estimates in its fourth quarter, mainly due to a shortage of processors from Intel.

New Gateway CEO Jeff Weitzen certainly won't let that happen again, so there's every reason to believe Gateway will turn to AMD for more processors down the road.

AMD's high-performance Athlon chip is already giving Intel a run for its money in the high-end market, shipping more than 920,000 units this quarter at an average selling price of about $288 a whack.

Those strong sales and margins point toward a better-than-expected quarter, according to Kumar.

"We believe that the December quarter results and the Gateway design win will be adequate catalysts to take the stock to the overhead supply level of $36 a share," Kumar said in the research note. "However, long-term the companies execution record or lack thereof and an inability to maintain a competitive roadmap against Intel should limit the price excursions beyond the stated levels."

AMD shares were hovering right around $30 a share Friday, well above its 52-week low of 14 9/16 set in February.

However, Wall Street has hardly embraced AMD's story as 13 of the 22 analysts tracking the stock maintain either a "hold" or "sell" recommendation.

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