The market for Internet stocks is often compared to the California gold rush, as a recent Business School study notes, and for good reason. Investors are scrambling to stake a claim in this hot market, much as speculators once tried to snap up supposedly gold-laden properties in the Sierra foothills. The frenzy for Internet stocks has driven prices into the stratosphere, and it has become difficult to separate true value from pure hype. Based on interviews with securities analysts and Internet company executives, the study describes how Internet stocks are valued and details how analysts, retail investors, and the Internet companies themselves influence prices. The study concludes that, for now, Internet stock prices are better explained by supply and demand than by long-term value.
Analysts play a pivotal role in valuation.
A favorable report can have a significant impact on a stock's price. Analysts can also sway a company's choice of bank for its initial public offering. As a result, achieving brand-name awareness and reaching growth milestones is very important. Some individuals may trade on inaccurate information they see in chat rooms, which has created frustration among Internet executives who have been trying to communicate through traditional methods. Executives told the researchers they plan to spend more time and effort trying to reach this growing group of investors.