NEW YORK (dpa-AFX) - After two laborious years, a revival of the European internet sector is taking shape in the view of US bank JPMorgan. Analyst Marcus Diebel expects an improvement in 2024, according to his industry outlook published on Wednesday.

According to the expert, the internet sector has barely recovered this year from last year's setback following the boom during the pandemic. Reopening effects after corona had a particularly negative impact in the first half of the year. Companies had rigorously focused on saving and also reduced their marketing expenditure. At the same time, consumers' budgets have been reduced due to high inflation. On top of this, high interest rates weighed on growth-oriented internet stocks.

However, the situation should brighten in 2024: Diebel expects a revaluation of shares from a low level. In contrast to many other sectors, the growth prospects have improved structurally and not just cyclically. He points in particular to strong improvements in profitability and cash flow. In addition, JPMorgan expects bond yields to fall again after a long upward trend, which should provide an additional tailwind.

Most recently, the expert favored internet stocks with high margins and low debt. He is now increasingly looking for strong momentum in earnings growth and plenty of financial scope for mergers and acquisitions. According to Diebel, takeover activities are likely to gain new momentum in the coming year. In addition, his favorites include those companies that have performed particularly well in risky times. A healthy balance sheet is no longer quite as crucial as before.

Diebel's preferred stocks are Hellofresh, Delivery Hero, CTS Eventim, Trainline and Stroer, all of which the expert rates as "overweight". THG, Auto Trader and JCDecaux, on the other hand, are comparatively unattractive with an "underweight" rating. The expert has also withdrawn his "buy" recommendation for Scout24 and Auto1 and has a "neutral" rating for both.

Online classifieds have recently been his preferred sub-sector, mainly due to the high margins. Increasing concerns in the face of tough competition may ultimately be unfounded, but will nevertheless weigh on share prices in the future. In the case of Scout24, the analyst also referred to the relatively strong share price performance of the online portal operators over the past two years.

Diebel sees sentiment and share prices at food suppliers at almost historic lows. However, improved profitability should pay off here in particular. The expert also expects takeovers that are likely to reorganize the sector. At Just Eat Takeaway, however, growth concerns should persist due to tough competition and continuing weak consumer budgets, which is why he leaves the Delivery Hero competitor at "Neutral".

With an "Underweight" rating, JPMorgan expects the shares to underperform the sector over the next six to twelve months. According to the "Neutral" rating, the bank expects the share to perform in line with the respective sector over the next six to twelve months. According to the "Overweight" rating, JPMorgan expects the share to outperform the respective sector over the next six to twelve months./niw/ajx/mis

Analyzing institute JPMorgan.

Publication of the original study: 05.12.2023 / 21:42 / GMT

First dissemination of the original study: 06.12.2023 / 00:15 / GMT