Jefferies: Weak Euro to Hurt Tech Revenues; Fundamentals Remain Strong (GOOG, AMZN, EBAY, YHOO, VPRT)

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for free. Jefferies is out with a comprehensive analyst note this morning that is examining the effects of the recent slide in the Euro, as well as the effects of a, supposedly, weaker Euro zone economy. They said that they see headwinds in the second half of 2010 due to the weakness in the European currency. Analysts said, “Assuming prevailing rates going forward, we expect the Euro and the GBP to decline 8% and 5%, respectively against the USD in 2Q vs. 1Q, and be down 12% and 7%, respectively in 2H vs. 1Q levels. We note that Jefferies Global Fixed Income team forecasts 3-month, 6-month and 12-month averages for the USD/EUR at $1.20, $1.15, and $1.10 respectively, pointing to the potential for further downside.” Among the large cap Internet names, they expect Google Inc.

, eBay

and Amazon.com

to see the most negative impact on their top lines from the unfavorable F/X translation. Among the mid-caps, VistaPrint

would see the most headwinds, given that 45% of its revenue is from non USD-denominated regions. As a result, Jefferies analysts are revising their 2010 top line estimates for these names downward by 2.5-4.0%. • Google's revenue estimates were lowered by 2.5% • Amazon’s revenue estimates were lowered by 2.6% • eBay’s revenues estimates are now adjusted down by ~3% • VistaPrint revenues are revised down by ~4% They do not expect Yahoo!

to see a similar headwind, given the company's relatively small international footprint (~25% of revenue). Piper analysts estimate that YHOO's Euro exposure is less than 10% of its total revenue, even after accounting for the payments from Yahoo! Japan, which are partially denominated in Euro. Jeffries closed by saying “Our downward revisions reflect primarily the negative F/X translation and are not indicative of fundamental deterioration in demand for these companies in these countries. In fact, our channel checks suggest that the EU debt crises has so far not led to a fall-off in e-commerce spending in Europe, and demand trends are largely intact, which bodes well for AMZN, EBAY And VPRT in our view." "Demand for online search remains healthy as well, particularly in the UK, where online ad budgets are up double digits as large retailers continue to run promotions ahead of the seasonally strong July, augmented by the soccer World Cup.”