European internet heads into 2023 with rising prospects, JPM says

Adevinta ASA

16/12/2022 08:56

** J.P.Morgan says outlook for the European internet sector
"is meaningfully improving" as expectations have been reset and
comparisons ease, despite low rate visibility going into 2023
    ** JPM's base scenario assumes inflation levels will
stabilize at some point in 2023, benefiting growth names
    ** The broker says further deterioration in consumer budgets
may weigh on a large part of the sector, particularly industries
such as food delivery and meal-kits
    ** But the extent of rapidly improving profitability in the
food delivery sector could surprise on the upside, it adds
    ** JPM favours names with compounding earnings growth and
M&A potential, highlighting media company Scout24  G24n.DE 
("overweight") for its resilient business model and Delivery
Hero  DHER.DE  ("overweight") whose improving profitability
could lead to meaningful upgrades in 2023/24 EBITDA estimates
    ** On the downside, the sector is highly exposed to staff
costs at about 19% of revenues, JPM says, expecting shortage of
employees and wage inflation to continue especially in the tech
space
 (Reporting by Linda Pasquini)
 ((Linda.pasquini@thomsonreuters.com))