A new 312-page report by JPMorgan Internet analyst Imran Khan and team paints a bullish picture for the major Internet stocks (Google, Amazon, Yahoo, eBay, Expedia, Salesforce.com, Ominiture, ValueClick, Monster.com, Orbitz, Priceline, CNET, etc.).
Why does this matter to the Sonian audience? Glad you asked! Sonian is at the intersection of the next wave of new Internet technology and business models, with the resulting product an efficient, reliable, affordable, easy to use web service that helps customers solve their archiving, compliance and e-discovery pain points.
Some interesting takeaways, courtesy of Techcrunch analysis:
- Noting that, in 2007, Internet stocks delivered a 14 percent return versus 5 percent for the S&P 500, JPMorgan expects 34 percent earnings growth in 2008 for the Internet stocks it covers versus 8 percent earnings growth for the S&P 500.
- In general, as broadband penetration continues to rise, so do e-commerce revenues.
- Free cash flow at large Internet companies will keep going up, fueling M&A and share buybacks. JPMorgan estimates that free cash flow among just five of the top Internet companies (Google, Yahoo, Amazon, eBay, and Expedia) will rise from $8.8 billion last year to $12.5 billion in 2008. That is a lot of money for Web 2.0 acquisitions. Top acquirers Yahoo and Google, for instance, each spend about a third of their free cash flow on acquisitions.
- As global GDP continues to grow faster than U.S. GDP (3.9 percent versus 2.2 percent in 2007), Internet companies with global reach will benefit. Amazon, eBay, and Google all get about half their revenues from international markets. Yahoo gets only a quarter of its revenues from abroad.