The Internet road map got a little clearer Wednesday, when three key Internet firms all beat estimates.
The three companies, Amazon.com, Mindspring Enterprises and Cnet Inc., are distinctly different, but also are acknowledged leaders in their markets. Granted, these markets are young, and confoundingly unpredictable. But the three companies are growing by leaps and bounds.
Growth is an important factor for investors to consider. The run-up in Internet stocks has many individual investors, and even some professional money managers, chanting the mantra that any Internet stock is a good stock to buy.
Amazon.com (Nasdaq:AMZN) appears to have hit on an excellent model for online retailers. It came up with a great idea first. It established crucial partnerships with portal vendors to get its name in front of a wide audience. Now, it's expanding into music and other products to leverage its head start.
So it should have been no surprise that it posted a smaller-than-expected loss in its second quarter while growing sales to a record $116 million in the quarter.
Several factors show that Amazon.com's popularity continues to grow. First, the sales jump represents a 32 percent jump from last quarter's sales of $87.7 million, and a 316 percent improvement versus the year-ago quarter.
Amazon.com also customer accounts explode, from 610,000 in the year-ago quarter to 3.1 million now. That's an improvement of 415 percent.
That's production. Production that justifies-sort of-a 178 percent explosion in its stock price over the past six weeks.
Partners help, too
In Cnet, investors have a leading online publisher with a major broadcast network for a sugar daddy. Plus, Cnet can generate its own revenue as its traffic and advertising revenue improve in each successive quarter.
Last month, NBC paid $26 million for a 19 percent stake in Cnet's Snap! online search and navigation service, giving it a 5 percent stake in Cnet as a whole.
At a time when many older and less Internet-savvy investors and analysts see a household name like NBC buying into this "online stuff," they get interested.
Wall Street predicted Cnet (Nasdaq:CNWK) would lose 21 cents a share this quarter. Wrong.
Cnet pocketed $252,000, or 2 cents a share, on sales of $13.1 million. Sure, much of this unexpected revenue came from the NBC deal, but analysts should have accounted for that as well.
Most of the upside surprise came from selling 20 percent of its stake in sofware maker Vignette, resulting in a gain of $4.5 million, or 26 cents a share. Without the gain, Cnet would have lost 24 cents a share, more than analysts expected.
Even so, it's about growth.
In the quarter, Cnet's online advertising sales grew 69 percent to $11.2 million, versus $6.6 million in the year-ago period. Company officials said its traffic increased to 6.4 million average daily page views in the second quarter. While that's only a four percent gain compared to the first quarter, first quarter traffic was up 20 percent from the fourth quarter.
And what about the guys who are on the front line, working to deliver the content to the eyeballs and vice versa?
Well, there's MindSpring Enterprises.
It and EarthLink Networks Inc. are the two largest independent Internet service providers. America Online has a lot of users, but there are millions of others out there waiting to be hooked up.
MindSpring shares closed up a whopping 13 11/16, or 11 percent, to a record high of 140 5/16 Wednesday.
Then, it beat First Call estimates by 6 cents a share, returning a profit of $2 million, or 24 cents a share, on sales of $25 million.
MindSpring continues to wow Wall Street by consistently growing its customer base. At quarter's end, it had more than 393,000 clients. That's a 15 percent gain from the 341,000 customers it had last quarter and a 115 percent move from the 183,000 it boasted in the year-ago quarter.
Investors can't get enough of MindSpring (Nasdaq:MSPG), as the stock has rocketed from a paltry 12 7/8 one year ago to Wednesday's record close. In the past six weeks alone, MindSpring shares have gone from 60 to 140, a 133 percent climb.
The message is clear: Selectively investing in Internet stocks is the only way to protect yourself from the great unknown. This market hasn't even begun to sort itself out.
If you don't think so, check out Netscape's two-year stock chart.