It’s another down day for Internet stocks, and Lehman Brothers’
star Internet analyst Holly Becker is hard at work in her spare corner office
at 3 World Financial Center. Her screens flash a blinking red before her: Yahoo
down 5 percent, eBay down 7 percent, Amazon minus 3 percent, AOL down, too. Ms.
Becker’s face remains coolly placid; her voice, conference-call honed and a
little high, registers no emotion as she goes through her paces on her first
client call of the day.
“I’ve never seen AOL senior management so confident. They
really feel that they are not feeling the pressure,” she says into her speaker
phone. “They are just better positioned with advertisers.”
“And you really believe they are that confident?” There is
the slightest hint of a quaver in the portfolio manager’s voice-a touch of the nerves, perhaps. This is Holly
Becker on the phone, after all, the now-famous slayer of the likes of Yahoo and
eBay; God forbid she turns on AOL.
“I just believe they are
going to make their numbers. The stock is down a lot already. I’m dealing with
stocks like Amazon, eBay and Yahoo that have absolutely no valuation support if
something goes wrong.”
Ms. Becker’s impatience is beginning to show a bit: Her head
is in her hands, she is rubbing her eyes-it has been 10 minutes or so on the
call, more than her increasingly hectic schedule can allow. It’s time to wrap
“Look, it comes down to this: For AOL–Time Warner, 5 percent
of sales come from online advertising; for Yahoo, that number is 90 percent
from online. AOL is just less vulnerable to an online advertising slowdown.
It’s the only Internet stock I’m recommending now.”
The client seems reassured, eager to agree. “Right, right,”
he stumbles over his words. “Yeah, yeah.” Whew! Holly likes AOL. Maybe that
rapidly dimming Internet sun would shine again some day.
This is Holly Becker’s moment. And what a moment it has
been. Six months ago, she was just another well-respected, well-paid sell-side
analyst, plying her trade in relative obscurity at Lehman Brothers. Then, on
June 21, having worked the numbers and come up with some disturbing findings,
she became the first front-line Internet analyst to issue a neutral rating
(Wall Street code for “sell”) for Internet bellwether Yahoo, then trading at
Shock! Horror! A neutral on Yahoo? The Street couldn’t
believe it. Spit on Pets.com or even Priceline, but Yahoo was the standard
bearer, the bluest of the Internet blue chips-especially after Amazon’s fall
from grace. The shorts jumped on her call, and Yahoo plummeted 16 percent
before the week was mercifully done. Today, it stumbles along at a mere $31.
For Ms. Becker, it was a Zeitgeist -defining call. Just as
Merrill Lynch’s Henry Blodget (once an equally obscure analyst at CIBC
Oppenheimer) presaged the market’s euphoric Internet boom in late 1998 with his
prediction that Amazon would double in price, Ms. Becker’s well-researched
swipe at Yahoo captured an evolving market mood that had yet to be fully
articulated: namely, that all (not
just some) Internet stocks were overvalued.
But she wasn’t done yet. A month later, she downgraded
Amazon with some prejudice ( Throwing in
the Towel at Amazon , her report read), and on Nov. 20, her coup de grâce : a downgrade of eBay.
Amazon is down 34 percent since; eBay, on the day she downgraded it, went down
15 percent. Now the phone calls are flooding in (she had 150 from the press,
clients and irate individual investors the day she downgraded eBay), she is a
popular CNBC guest and the New York Post
runs her photo regularly.
With the echo of the
Internet bubble’s pop still ringing in investors’ ears, the hip calls are now
the bearish ones. Internet bulls such as Morgan Stanley’s Mary Meeker and Mr.
Blodget seem to be yesterday’s news.
It’s prime time for Holly Becker. But is she ready?
“Every single one of those calls, they all make me nervous.
On every one, I’m alone,” Ms. Becker says with a whoosh of nervous laughter. “I
mean, I ask myself: ‘What do I know?’ Every day I look at my screen, and Yahoo
is still going down. So I think: ‘Is it time to upgrade?’-because I don’t want
to miss it on the upside. It’s nerve-wracking.”
The 34-year-old Ms. Becker certainly looks ready for prime
time. Her hair is long, black and luxurious; her dark skin seems to carry over
a summer tan; her sparkly smile is magazine-cover ready. She is not just a pretty
face, either. A product of Chicago’s North Shore, she got A’s at the University
of Illinois and cruised through the London School of Economics and Harvard
After a brief stint at McKinsey & Co., she hit Wall
Street for good in 1994, starting out at Smith Barney as a consumer-goods
analyst and covering big-name stocks such as Procter & Gamble, Avon and
Gillette. She later became an e-commerce analyst, picking up coverage of the
likes of Amazon and eBay. Things looked good, but they got even better when
Lehman Brothers called last March. Did she want to make the move over and
become the company’s No. 1 Internet analyst?
You bet she did. The split from Smith Barney, however, was a
nasty one. “It got ugly,” she says. “I would never do it again; they said, ‘We
hired you when you were 27.’ I said, ‘Hey, I gave you an Institutional Investor ranking.’ Lawyers got involved; it was not a
By the spring, she was up and running at Lehman but was
still, for the most part, an unknown. She started with a buy on Amazon in May
(“That was a mistake,” she admits) and then shifted her attention to Yahoo.
It may seem hard to believe now, amidst all the wreckage,
but the consensus last spring was that companies like Yahoo and eBay, given
their strong brands and market share, would survive any fallout from a meltdown
in Internet stocks. Especially Yahoo: It was a magnet for dot-com advertising,
which at the time was in a powerful growth mode. At $142, Yahoo was trading at
a nosebleed price-earnings ratio of almost 300.
Ms. Becker’s feeling was that Yahoo’s explosive revenue
growth-driven largely by dot-com ad buying-was going to taper off as cash
became more scarce in dot-comland. But then she took the extra step and polled
60 major advertisers to get a sense as to whether they would pick up the slack.
Most said no. Conclusion: Revenue
growth was going to slow in coming quarters, and the company’s vertigo-inducing
P-E ratio was at risk.
Down came the ax. Her
timing could not have been better. At 142, Yahoo was off its high of 240, and
the investment community was getting a bit leery about Net stocks; indeed,
investors were looking for an excuse to sell. And so Ms. Becker obliged.
“In hindsight, yes, my timing was lucky,” she concedes. “But
remember-at the time, the call was controversial. The stock was already down;
the inclination was to say, ‘This is a high-quality company ready to rebound.'”
Portfolio managers lauded her efforts. “That was a great
piece of research,” said one. “She deserves a lot of credit for it. The real
key, though, will be when she tells us when to buy stocks. For now, though, I’m
reading her research before Mary and Henry’s. She moves markets more than they
Says Mr. Blodget (who himself just downgraded his Yahoo
revenue estimates last week, further sustaining the stock’s downward spiral):
“Holly made a great call. I take my hat off to her. I wish I had made such a
Insiders say Mr. Blodget makes about $10 million a year for
his calls, Ms. Meeker a reported $15 million. Ms. Becker would not comment on
how much her bonus will yield her this year (probably substantially less than
her higher-profile colleagues), but it’s likely to be healthy.
Pretty heady stuff for Ms. Becker, who was recently married
(her husband manages money for a hedge fund) and is now five months pregnant.
You wouldn’t know it by looking at her, though. An ardent spinner, she remains
slim and petite. Indeed, before her pregnancy she would regularly attend three
consecutive hourlong spinning sessions-on Saturday and Sunday mornings-at the
Zone, a high-end gym near her weekend house in East Hampton.
But her life has changed in other ways. These days, she is
on the road visiting clients as many as 12 business days a month. During the
week in New York, she usually has several business dinners. She lives in a high
rise on 66th Street and Amsterdam Avenue, a short hop from the No. 1 or 9 train
that gets her into the office at 7:15 a.m. for the morning research call.
Still, she has to admit, the buzz must feel good, no? Isn’t
it cool to have old high- school chums calling up and saying “Holly! I saw you
on TV while I was working out”? Or to have chief executives of the old
companies you covered sending warm notes saying: “We are so proud of you”? (To
say nothing of the scrapbook her mother keeps.)
“I don’t love that part of it,” Ms. Becker said. “You know,
I was a pretty visible analyst before, but it’s different now. No one likes to
be in the limelight. It’s not fun; it makes you insecure; there is always
someone who wants to criticize you.” Dealing with the press is tricky, too. The
two times she has spoken in depth with reporters, she says, she has been
burned-once in The New York Times
and, more recently, in an article in Business
Week , in which she is quoted as saying that a colleague of hers covering
Amazon had “no insight into the company’s strategy.” “I never even said those
words,” she insists. “Maybe I’m wrong, but I just trust that people are not out
to get me.”
For someone who gets 15 calls a day from the press (she does
not pick up her phone, leaving that responsibility to her assistant and her
four junior analysts), Ms. Becker is surprisingly unschooled in the fine art of
“You promise you are going to be nice to me?” she frequently
asked The Observer during her
Perhaps it’s because, even with all the trappings, Ms.
Becker has still not fully embraced her Moment. “I worry every day that my
calls are going to be wrong. I second-guess everything I do …. I’m totally
insecure about every call; I’m always worried about it. The night before a big
call, I don’t sleep the whole night. It’s one thing to be positive and wrong;
but if you are negative and wrong on your sector-after a while, you get fired.”