JP Morgan has released a bullish report on the 2008 growth of Internet companies titled “Nothing But Net.”  It’s a massive 312 page report with predictions for the industry as a whole as well as predictions on the major Internet companies.  Some of the highlights for the industry as a whole include:

• While they predict earnings growth to decelerate from 25.6% in FY07 to 21.2% in FY08 for Internet companies they are projecting earning per share (EPS) at 34% compared to 8% for the S&P 500.
• Global search revenue will increase to $30.4B in FY08 and will hit $60B by 2011.
• Internet companies should benefit from global consumer growth.  They believe global Internet companies are well positioned since global GDP has outpaced the US in recent years and with a projected CAGR (in simplest terms it means the growth rate over a period of time) of 6.5% over the next 3 years there will be hundreds of millions of new online consumers.
• The 5 largest Internet companies generated $8.8B in free cash flow (FCF) in FY07 and that number is projected to increase to $12.5B in FY08.  They predict a significant portion of that will go towards mergers and acquisitions within the sector.

Their top picks for Internet companies in FY08 are:

• Google
• Yahoo
• Expedia
• Omniture
• Shutterfly
• Monster Worldwide

I won’t go into details on all of the top companies, but a couple interesting predictions for Google that are contained in the report include:

• Paid clicks will grow 30% Y/Y
• International revenue will reach close to 50% of total revenue in FY08, growing 42% Y/Y
• Web-based cloud computing will become more widely adopted in FY08 as it becomes more mainstream.  For a great article on Google and cloud computing read this recent article in Business Week
• The introduction of a complete services package will appeal to consumers and if they can capture 10% of the office productivity market it would mean an additional $1B in revenue.  The complete services package includes word processing, spreadsheets, and presentation capabilities.

These are just a few of the many predictions and insights that are contained in the report.  Check out the full report for all the details.

Filed under: Off Topic on Thursday, January 3rd, 2008 by Nate Linnell | No Comments
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