Sentiment is growing among investment analysts that days of reckoning are nearing for some of the high-flying Internet commerce stocks.

PaineWebber Inc. analysts Edward Kerschner and Thomas Doerflinger set the tone this month with a sobering report, "Net for Naught," that questioned the survivability of the dozens of "pure Internet plays" that have bubbled up in the last three years without delivering profits.

Other analysts who zero in on Internet-based banking and financial enterprises-Ameritrade Inc., Cybercash Inc., Security First Network Bank, and Open Market Inc., to name a few-generally went along with the assessment.

They see a difference between a company like America Online Inc.-which seems to be establishing itself as a valuable consumer brand and Internet intermediary-and one like Security First Network Bank, which did not deliver on early investor enthusiasm and decided to sell, to Royal Bank of Canada.

"My sense of the Internet stocks in general is that the valuations are still very high, and that is somewhat perilous for investors, said Credit Suisse First Boston electronic banking and computer services analyst James Marks.

Such observers are not universally sour. Bill Burnham of Piper Jaffray in Minneapolis warned against "throwing the baby out with the bathwater. ... This is a radical change in the economy and some very, very big companies are going to be built here."

Gary Craft of BancAmerica Robertson Stephens, San Francisco, said being an "early mover" can still work to the advantage of a company like Cybercash with a unique thrust and strong management.

But there is also a strongly prevailing view that a shakeout is inevitable and drawing closer.

The PaineWebber "Net for Naught" report drew parallels with an earlier computer market boom: "How many of today's Internet industry leaders will share the same fate of Atari, Commodore, and Tandy, the industry leaders of the PC business in 1982?" the analysts wrote.

"Given the lack of earnings, could the price of many small Internet stocks plunge without becoming demonstrably cheap? ... Even if the Web's future is immensely promising, many stocks, at their current valuations, could turn out to be poor investments."

The analysts pointed to a dichotomy between the "vast potential rewards" of the World Wide Web and "the great risks faced by small companies."

The impressive growth in these Internet start-ups' revenue does not necessarily translate to long-term earnings health. For this reason, PaineWebber is recommending investments in established companies with ancillary Web strategies, which presumably are in a better position to offset the risks of on-line entrepreneurship.

Even as PaineWebber raised a caution flag, its index of 75 Internet companies, many of which have yet to report profits, ballooned by 102% since the end of 1997. The Standard & Poor's 500 rose only 15% over that time.

The analysts said the near-term excitement has been fueled by growth in the home computer market and recent favorable policy pronouncements from the Clinton administration on electronic commerce.

Mr. Marks said the market may be nearing the end of its proliferation stage, which would normally be followed by a shakeout or consolidation. Yet there is great potential for innovation, and Mr. Marks said the winners will be those creative enough "to understand how this can alter an entire process."

He counts brokerage companies Charles Schwab and E-Trade Group among these-some corporate strategy experts praise them for "breaking rules"-and he looks askance at companies that merely replicate old processes in electronic form.

Fewer than one in five will emerge as "huge successes," Mr. Marks said. "A lot of them will be bitter disappointments for investors."

"I would say that today's big players may not be tomorrow's winners," Mr. Craft said. "We just do not know."

After going public in February 1996 and climbing as high as $64 a share, Cybercash of Reston, Va., bottomed out at $10.125 in February this year. It was above $16 last week.

Cybercash reported first-quarter revenue of $1.1 million, up from $155,000 a year earlier but down from $2 million in the fourth quarter. It shaved its net loss to $5.6 million, from $9.2 million in the 1997 first quarter.

"Earnings were basically in line, but there were some deferrals in revenues," said Mr. Craft. The share price "has basically taken a breather."

Like Cybercash, Security First Network Bank of Atlanta enjoyed a recent stock price run-up to TKTK at midday Friday, up 44% this year but off from the $45 peak on its first trading day, May 17, 1996.

Revenue in the first quarter more than doubled, to $3.4 million, but its loss also rose, to $8.1 million, from $6.6 million a year earlier.

Chief financial officer Robert Stockwell acknowledged that there are overvaluations in the market. "We are still in an area that is brand new, an emerging area of technology and an emerging area of commerce," he said. "There are going to be a tremendous number of niche players that are coming in and trying to play in this game."

One niche player, First Virtual Holdings Inc., may be the cautionary tale of the moment.

An Internet payments company that changed its focus to on-line marketing and advertising, went public at $9 on Dec. 13, 1996, but its shares languished at around 80 cents recently. Early this month it sold 10 million shares to Softbank Holdings Inc., a Japanese communications and technology conglomerate. Softbank can now name a majority of First Virtual's directors.

With a $6 million price tag, "the word 'fire sale' comes to mind," Mr. Burnham said. "They clearly went down a dead end."

Mr. Burnham's advice to Internet investors was to get "a Bible and a strong stomach." He foresees several more years of entrepreneurial proliferation that will result in even more initial public offerings.

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