5 Takeaways From Internet Sector's Q4 Earnings
- Shares of American Internet companies have been trending lower in 2016.
- While shares of Netflix, Inc. (NASDAQ: NFLX) and Twitter Inc (NYSE: TWTR) have lost more than 20 percent since January 4, shares of Facebook Inc (NASDAQ: FB) and Alphabet Inc (NASDAQ: GOOGL) are down less than 10 percent.
- Nomura’s Anthony DiClemente believes that factors enabling outsized growth for large scale internet players in America are sustainable.
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Analyst Anthony DiClemente listed five key takeaways from the Internet segment’s Q4 earnings:
- The biggest Internet companies registered significant revenue acceleration.
- Smaller Internet players could not beat estimates.
- Technical factors exacerbated sell-off.
- International growth continues to be hindered by currency-related factors.
- Discussions of strategic alternatives have emerged.
DiClemente expects the factors responsible for the robust growth of large-sized Internet players to continue in the future, driven by a continuation of the positive network effects. Users of Google Search, Facebook/Instagram and Netflix are accustomed to a better user experience and thus ready to pay more for premium content.
The large-sized companies are ready to make continued investments to enhance their products and services relatives to competitors, the analyst noted, while adding that the large user base is also useful for ad supported models, as it offers them wider reach, better scaled ad targeting and industry-leading advertising ROI.
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