Morgan Stanley has lowered its view to in-line in case of internet-based firms as the sector has outperformed the S&P 500 by 4700 bps since the beginning of 2015.
In its latest research, it has said that it believes that multiple expansion will be a more difficult driver for the sector going forward. “We favour large-cap bellwether names including Google, Priceline, Facebook and Amazon with attractive growth-adjusted valuations and upward revisions ahead,” it has noted.
It has downgraded the ratings for some of the internet companies including TrueCar, Rubicon, RetailMeNot, Grubhub. For example, in case of Trucar, a pricing and information website for new and used car buyers and dealers, it has said that traffic growth to the site has continued to decline, down to 12% year-on-year in Q2 of 2016. Also TrueCar did not add any new users sequentially for the first time, it said.
Similarly, Morgan Stanley has downgraded the rating for RetailMeNot, which sells discount coupon codes online from equal weight to underweight, with a price target of $8.60. The research firm listed reasons like traffic growth remains a challenge, while mobile continues to be a headwind as monetisation rates are one-fifth that of desktop, etc.