Facebook Inc (NASDAQ:FB), Amazon.com, Inc. (NASDAQ:AMZN), & Others Downgraded
Internet stocks, which have been hot this year, are all set to move to downward direction, said one of the leading investment analyst firm Morgan Stanley (NYSE:MS).
In a note to investors, Morgan Stanley analyst Scott Devitt wrote that he sees a more “balanced” risk reward, following strong performance by the internet stocks till date in 2013.
The Internet stocks covered by Morgan Stanley, including Facebook Inc (NASDAQ:FB), Amazon.com, Inc. (NASDAQ:AMZN), and Google Inc (NASDAQ:GOOG), on average are up 57% so far in 2013, while the Nasdaq Composite Index benchmark has gained approximately 28%.
Instead of the positive estimate revisions, it was multiple expansions that drove the outperformance, claimed the analyst. However, Morgan Stanley believe that despite strong secular trends, current valuations could be full.
Morgan Stanley, in its latest note, has downgraded the internet industry view from “attractive” to “in-line.” This downgraded report means Morgan forecasts these stocks to return “about the same as the broader market” over the next one year to 18 months, instead of surpassing it.
Interestingly, the investment research firm has also taken Google out of Morgan Stanley’s Best Idea list, saying most of the company’s ideas that could have been a reason for the search engine giant’ stocks gain have already been played out.
Many investors have felt that the players in the internet sector will be growing as they have got a much bigger market to address. They argued that that as more tech-savvy young generations are entering “heavy-spending” years and buy vehicles, houses and other expensive items, most of them are going to online search and spend more time over the web for their needs. This would in turn help in boosting traffic and in turn revenues of the internet companies.
Morgan Stanley (NYSE:MS)’s Devitt argues this notion calling it as the “total addressable market.”