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Tech Stocks Take Charge in Sept.
TiVo, Google, Satellite Radio Among High-Profile New-Media Gainers

by Paul Bond
Hollywood Reporter

Market historians note that the odds of September being an up month in a presidential election year are about 70%. Score a half-point for market historians as the NASDAQ advanced 3.2% last month, while the Dow Jones Industrial Average sunk 0.9%.

But considering the negative hoopla over the price of oil that has been endlessly expressed by market-watchers on "Squawk Box," "Bulls & Bears," "Kudlow & Cramer" and the rest of television's Wall Street shows, last month wasn't half bad.

Oil was up about 17% for the month, acting as a tax on the economy, and has been flirting with the $50-per-barrel mark, a price that experts call a psychologically important barrier that, if cracked too hard, would send stocks significantly lower.

That last month was fairly good for the NASDAQ also is surprising given that Intel Corp. delivered a profit warning three weeks ago, sending semiconductor stocks on the whole down for the frame.

But several high-profile technology stocks have done quite well as of late. Tom Taulli, who runs IPO tracking firm CurrentOfferings.com and wrote the book "Investing in IPOs," mostly focuses on new issues, like Jamdat Mobile Inc., which went public Wednesday at $16 per share and popped more than 40% that day.

Jamdat develops games, ring tones and images - like its suite of products based on "The Lord of the Rings" franchise - for wireless devices.

The company garnered just $90,000 in revenue in 2001 but boasted $15.4 million in revenue in the first six months of this year, when it earned a $1.1 million profit.

"It's an emerging market that kind of came out of nowhere, though investors are looking at Europe and Asia where the wireless market is more established," Taulli said.

Taulli said that Internet search powerhouse Google has remained strong since its recent IPO but that investors might want to brace themselves for a fall.

"The IPO process was all over the map, but it popped the first day and has gone up since," he said. "The investment bankers in the deal keep putting out bullish reports."

No exaggeration: There were five such reports issued last week, including one from Credit Suisse First Boston that puts a $145 target on Google shares. They closed out September at $129.60, up 27% on the month and 53% since it went public in August at $85 per share.

Several new-media firms also were on the mend last month after suffering through most the summer. Shares of TiVo Inc. gained 54% in September largely on speculation early in the month (though confirmation finally came after the bell Thursday) of a video-on-demand partnership with Netflix Inc., whose shares advanced 11% for the frame.

Kaufman Bros. analyst Mark May said this week that interest in shorting - a strategy whereby investors profit from shares that go down in price - is on the rise when it comes to Internet firms.

Short interest in the Internet Index he follows increased 2.7% from Aug. 13-Sept. 15, with eBay, InteractiveCorp, ValueClick, FindWhat.com and Amazon.com sporting the largest gains in short interest.

Although May said that using patterns in short interest alone is not a good way to make investment decisions, "Typically, a rise in short interest is a sign of negative sentiment. People who short stocks are considered smart money."

Of the 26 stocks that make up the Internet Index, he's most bullish on online advertising agency aQuantive. Short interest there actually decreased in the latest monthlong time frame, and shares were up 11% last month.

The dueling satellite radio firms benefited last month from some analyst upgrades. Sirius Satellite Radio was 38% higher during the month and XM Satellite Radio was up 13%.

On Thursday, Wall Street firm Sanders Morris Harris went to a "strong buy" from a "buy" recommendation on XM, and J.P. Morgan went to an "overweight" from "neutral" on Sirius.

A September report from ChangeWave Research rates Sirius a "buy" while acknowledging shares already have run quickly higher during the frame.

Satellite radio as a service, ChangeWave said, "is leaving the innovator phase of the market and is near mass-market acceptance. This level of acceptance will enable both satellite radio companies to survive and prosper through growth or acquisition by another company."

ChangeWave said that it had first recommended XM in early 2002, but that Sirius, which lags XM in terms of subscribers, has superior partners, including the NFL, and a more conservative valuation.

"Sirius, although playing catch-up, has a strong chance to gain market share," ChangeWave said in its report.