Without a doubt, the internet, which has had a spectacular growth cycle over the past 25 years, has become one of the single biggest leaps in technology as it applies to the consumer ever. The rate of growth has been and will continue to be staggering, and in a compelling new series on the National Geographic channel, “Valley of the Boom,” Millennials that were just being born at the dawn of the internet, can now see the feeding frenzy that it caused in Silicon Valley in the mid-1990s.
With huge jumps in technology, internet speeds that in some areas that have reached one gigabit, and literally hundreds of thousands of apps to choose from for every conceivable need, the internet’s future indeed is bright, and the fantastic growth rate is probably sustainable for years to come.
In a new research report, SunTrust’s internet and digital media analyst, Youssef Squali, not only presents the firm’s top picks in the sector, which we will cover on Thursday, but he also presents five bold predictions for 2019. In a sector that has come under increasing scrutiny over data leaks, customer data being used incorrectly, privacy concerns and a host of additional issues, many of the top stocks took a beating last year.
Squali noted this in the report when sizing up the sector for investors:
We remain constructive on the Internet and Digital Media (IDM) group for 2019 and recommend that investors stay the course. Despite macro-economic and political concerns, regulatory and currency headwinds, we believe the drivers of secular growth remain in place while valuations have on average reverted back to the midpoint of their 5-yr historical range.
When discussing specific issues the sector faces, he also noted this:
A question we often get lately is which names within the IDM sector are more resilient to a recession, should one occur. In reviewing our coverage universe, it is clear to us that not all IDM names are created equal; some should be more resilient to an economic slowdown than others. We believe that those that operate mission critical applications on behalf of businesses (large and small), including Web presence and cloud computing should do relatively well.
Here are the five top internet and digital Media predictions from SunTrust for 2019:
- Facebook Inc. (NASDAQ: FB) will strengthen its board of directors with a new and very independent chairman.
- IAC/InterActiveCorp (NASDAQ: IAC) will use the company’s very strong balance sheet to make its biggest acquisition yet. The company currently operates through Match Group, ANGI Homeservices, Video, Applications and Publishing segments.
- Alibaba Group Holding Ltd. (NYSE: BABA) also is expected to also make a huge and splashy acquisition in Europe.
- EBay Inc. (NASDAQ: EBAY) may become the target of activist investors. With a market cap of almost $30 billion, it may take some deep pockets to affect real change.
- If President Trump and the United States are successful in forcing China to open up its market for U.S. businesses and to protect intellectual property, the prospects for the mega-cap technology companies like Alphabet Inc. (NASDAQ: GOOGL), Amazon.com Inc. (NASDAQ: AMZN) and Facebook could be substantial.
Any way you slice it, the prospects and growth possibilities for the internet and digital media remain massive, and while the barriers to entry have grown over the past 25 years, there will always be a place for something new and innovative that changes the status quo.
Investors looking to be in the mix may want to stay with the mega-cap leaders, as their entrenched power and huge cash balance sheets allow them to pursue and develop new areas and business silos quicker. That edge isn’t going away anytime soon.