http://blogs.wsj.com/marketbeat/2011/07/13/netflix-amazon-google-get-j-p-morgan-lurve/?mod=google_news_blog
MarketBeat
WSJ.com's inside look at the marketsNetflix, Amazon, Google Get J.P. Morgan Lurve
By Mark Gongloff
- AP
J.P. Morgan’s new Interwebs analyst Doug Anmuth penned his inaugural love note to the series of tubes today, and it turns out his favorites are Amazon, Google and Netflix. Sorry, Yahoo and eBay, he’s just not that into you.
Mr. Anmuth started Amazon, Google and Netflix with buy ratings and slapped chilly holds on Yahoo and eBay.
But, really, he just loves, or maybe even lurves, the whole Interwebs:
Strong Secular Growth to Continue. With online advertising at ~18% of total ad spending and eCommerce at ~9% of total retail (in the U.S.), we believe these segments will both have many years of double-digit growth ahead on a global basis. The Internet economy will also likely be bolstered by monetization of online video content, virtual goods, applications, and cloud-based services.
Confluence of Key Trends Led by Mobile. We believe mobile smartphone adoption has played a critical role in accelerating key industry trends including social and local. As smartphone penetration moves beyond the current ~30% global penetration rate, we expect mobile to have an even bigger impact on Internet business models.
Strong Revenue Growth Is Scarce. We believe many Internet companies deserve premium valuations to the broader market and other tech companies given their outsized revenue growth rates and market opportunities combined with the scarcity value of growth overall. We note that only 9% of companies in the S&P 500 are growing above 15% and they trade at a ~60% premium to the rest of the index.
Platform Wars Are Intensifying. We believe Amazon, Apple, Google, Facebook, and to a lesser degree eBay, are emerging as primary platforms on top of which large amounts of online/mobile communications, advertising, and commerce are likely to be conducted. Notable characteristics of these major platforms include global reach, large and developing ecosystems, strong network effects, and revenue generating toll-booth capabilities. Importantly, these platforms grow stronger as the rest of the Internet increasingly relies on them.
Top Picks Are Netflix, Amazon, and Google. Despite recent share price appreciation in these names, we believe there is further upside into the seasonally stronger back half based on continued strong growth, new market opportunities, and margin stabilization. Netflix is our top near-term pick and Amazon our top long-term pick.
Netflix shares are up nearly 4% in early trading, despite roiling customer outrage over its new pricing plan. Amazon and Google are each up more than 1%. Yahoo and eBay are up a bit, too.
