Morgan Stanley has lowered its view on all internet company stocks from "attractive" to just "in-line", warning that sector has to show some more growth if it wants to justify current valuations on shares.
In a research note to clients, analysts said that investors had been looking at the total addressable market (TAM) opportunity but not paying all that much attention to risks, Reuters reported.
"There many not be enough TAM for all of our companies to achieve long-term estimates," they said.
Many internet firms rely on advertising for their main revenues and the analysts seem to be suggesting that there just might not be enough ad money to go around and give the kind of profit and revenue growth that would make current share prices seem worth it.
Morgan Stanley's list of 23 internet stocks includes companies like Google, Amazon, LinkedIn, Facebook and eBay and while it's not recommending that investors sell off their stock, it is advising them to slow down and think harder about where to put their money.
The analysts kept their "overweight" rating on a lot of the firms, particularly those with large capitalisation and bellwether names like Google and Amazon, and said that they still believed that they "hold upside" but added that the overall valuation for the group was "unflattering". ®