SAN FRANCISCO (MarketWatch) - Netflix Inc. shares gained as much as 7% Wednesday as a Citigroup analyst initiated coverage of the stock with a buy rating and a $39 price target, while many names in the Internet sector finished the day with modest gains.
Google Inc.
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shares fell nearly 1% after the Internet search king finalized its deal to buy 5% of Time Warner's
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AOL unit for $1 billion and expand their advertising and promotional partnerships.
Tracking the sector, the Dow Jones Internet Index
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rose 0.4% to 95.77 points, while the technology-heavy Nasdaq Composite Index
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was up 9.24 points at 2,231.66.
Netflix Inc.
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shares gained 9% to $27.39. Citigroup analyst Tony Wible wrote that Netflix's competitive advantage and scale benefits are accentuated as it helps consumers find lesser-known titles.
"As the leader in subscription based services, we see Netflix as increasing the barriers to entry while realizing scale benefits that until recently have been masked by competitive pressures and growing pains," wrote Wible.
Google shares finished off 0.8% to $426.33, while Time Warner shares fell 16 cents to $17.58. The deal allows the two to collaborate on video search and showcase AOL's premium video service within the Google Video product. The companies will also expand display advertising throughout the Google network, and create an AOL Marketplace that will allow AOL to sell search advertising directly to advertisers on AOL-owned properties.
See full story.
Also on Wednesday, W.R. Hambrecht initiated coverage of Google with a buy rating and a $480 price target; the brokerage slapped rival Yahoo Inc.
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with a hold rating and a $40 price target.
"We believe Google will benefit from strong growth in advertising revenues through 2006 and beyond because of its superior search technology, advertising innovations and dominant brand," wrote analyst Denise Garcia.
Regarding Yahoo, Garcia wrote: "Although we believe in the potential of Yahoo's products, state-of-the-art advertising technology, and other leading initiatives such as its looming phone service, we believe this is more or less reflected in the current share price."
Yahoo shares were off 0.5% at $40.47.
EBay Inc.
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shares were up 0.3% to $44.29, while Amazon.com Inc.
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shares were up 1.7% to $48.97.
Meanwhile, a computer virus called the Santa Claus worm has been active among AOL, Microsoft Corp.'s MSN and Yahoo instant-message users.
Other stocks moving in the sector included shares of TheStreet.com Inc.
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and Digital River Inc.
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Scott Banerjee is a reporter for MarketWatch in San Francisco.