J.P. Morgan published a report entitled "Internet" on January 13, 2012. In the report, Doug Anmuth, Kaizad Gotla, Shelby Taffer, and Bo Nam indicated a positive view on the Internet sector. The analysts are of the opinion that the "internet economy will be driven by strong secular growth, increased online accessibility via mobile devices and tablets, and emerging online trends". J.P. Morgan has identified several key internet industry themes such as an increase in platform wars, the convergence of online and offline shopping, and a growth in display advertising. J.P. Morgan has listed a few stocks and, in this article, we will discuss the Neutral rated stocks.
Yahoo! (NASDAQ:YHOO) operates as a digital media company that is responsible for delivering personalized digital content and experiences. It has been given a Neutral rating by J.P. Morgan despite challenges faced by its core business. The company has strong exposure to the Chinese market with its stake in Alibaba. According to J.P. Morgan, it has the potential to increase its margin, but its valuation still remains low. Investors are recommended to watch for the monetization of the Yahoo! Japan stake through tracker or spin, increased buybacks in shares, and a potential return to revenue growth. Shares of Yahoo! are currently trading at $15.6 per share, and are expected to reach a price target of $17 by the end of 2012. Dan Loeb made a huge bet on Yahoo during the third quarter.
eBay (NASDAQ:EBAY) provides an online marketplace for the sale of goods and services along with other online commerce, platform, and online payment solutions. It has been given a Neutral rating by J.P. Morgan. The strong growth of PayPal and the traction in the Marketplace turnaround are incrementally positive for shares of eBay. J.P. Morgan believes that the company is innovative in terms of mCommerce, mobile payments, and online/offline shopping convergence. The acquisition of GSI Commerce (NASDAQ:GSIC) will lead to a greater access to merchants, and more control over the entire customer experience. Shares of the company are currently trading at $31, and are expected to reach a price target of $37 per share by the end of 2012. Eric Mindich doubled his stake in EBAY during the third quarter.
Netflix (NASDAQ:NFLX) is a provider of subscription-based internet services for television shows and movies. It has been given a Neutral rating by J.P. Morgan. Netflix is expected to double its domestic streaming content, while the value proposition to its streaming-only subscribers remains unchanged. Start-up costs in Latin America and the U.K. are expected to be higher than anticipated, resulting in lowered profitability for Netflix in the early quarters of 2012. Shares of the company are currently trading at $97.7 per share and are expected to reach a price target of $67.
Groupon (NASDAQ:GRPN) operates as an e-commerce marketplace which connects merchants to consumers by offering discounts. It has been given a Neutral rating by J.P. Morgan. Subscriber growth is expected to slow down in the coming future, with Google and Amazon investing in the local deal space. Investors are advised to watch for penetration of new categories such as Groupon Gateways and Groupon Now. Shares of Groupon are currently trading at $19.4 and are expected to reach a price target of $24 per share.
Bankrate (NYSE:RATE) owns and operates an internet-based consumer banking and personal finance network. It has been given a Neutral rating by J.P. Morgan. The company is in a good position to benefit from secular and cyclical growth of the online financial services advertising. Its rich content and information attracts clients and J.P. Morgan also believes that the company is more diversified through its acquisitions in insurance and credit cards. On the other hand, Bankrate has significant exposure to the macro environment. Shares of the company are currently trading around $23 per share and are expected to remain at the same level by the end of 2012.
QuinStreet (NASDAQ:QNST) operates as a vertical marketing and media online company. It has been given a Neutral rating by J.P. Morgan despite expectations of a healthy longer term growth. QuinStreet is expected to face problems with visibility, and challenges in the Education and Financial Services segments. The company has an opportunity to expand internationally. Investors are advised to watch for competitive pressures and pricing trends in the auto-insurance space. Shares of QuinStreet are currently trading at $10 per share and are expected to reach a price target of $13 by the end of 2012. Jim Simons' Renaissance Technologies is among QNST investors.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.