Submitted by Morgan Smith as part of our
Internet commerce in the United States is likely to be worth
about $220 billion this year. Along with that, the internet's
impact on print media, recorded music, and various other avenues
has been undeniable. I wanted to take a look at some leading
companies whose business is wholly or partly internet dependent. Of
course, that might mean anything, so let's just say I am looking at
some really big companies whose have had recent developments of
interest to me.
is the west's largest company by market capitalization, with a
current value of about $620 billion. While impressive, the stock is
down about six percent from its high point late in September,
The Apple world is noting the one year passing since the death
of its former visionary CEO, Stephen Jobs. Since then, the big new
was its selling 5 million units of the highly profitable iPhone 5
in the first 48 hours after it went on sale. It also sold some 17
million of its iPad units in the second quarter of 2012, up nearly
double from the same period of 2011. Its next big announcement will
be its iPad mini, which I expect to be another huge hit.
But there are clear signs that Apple's momentum is slowing.
First, as the stock price is up 68% this year, it is silly to
believe that is sustainable. Second, as always, Apple is not
infallible. Its dropping of
maps from its iPhone 5 operating system was a
public relations mess
. Competitors, chiefly Samsung, have pretty well equaled the
innovations that have made the iPhone line special. But just
because momentum is slowing hardly means it is stopping. Second
quarter revenues and earnings were up 23% and 21%, respectively.
Yet even if the growth does rate does fall some, the stock is
trading at a price to earnings ratio of a little over 15, so the
PEG suggests an undervalued situation. From my perspective, Apple
is cheaper today than it was a few weeks ago, and no big cap growth
portfolio can call itself complete without Apple as a holding.
is the gaming sibling of
. Zynga stock went public a couple months before Facebook, and saw
its share price rise by some 60% up to nearly $16 per share before
falling back most recently to about $2.50 per share. What has
recently driven this decline is that Zynga management's advice that
its already lowered forecast for third quarter 2012, full year 2012
revenue, and 2012 earnings, would not be met. Not only is the
company experiencing declining use of its games such as FarmVille
and CityVille, it also is not seeing expectations met on its $182
million March acquisition of
. It plans to write off about $90 million of its investment in this
quarter, leading to a loss for the quarter. Management lowered 2012
EBIT projections down by about 20%, to from $147 million and $162
million. Previous estimates had been from $180 million to $250
As it is now, Zynga is scarcely trading over the sum of its cash
and real estate, a remarkable achievement of market disrespect for
a tech company. I don't see any reason why one would invest in this
Zynga is to a large extent dependent upon Facebook for
customers. Facebook of course has had its own issues since going
public early in 2012. But the good news abides as long as you were
not one of the many early investors in Facebook's public ownership.
The stock is trading now at about half the price some buyers paid
on that first day of trading. But now, with the "froth" blown off
the stock price, there is a reasonably priced company to discover.
Facebook now has over one billion users, and now just needs to more
smoothly monetize all those users. It is not hard to see earnings
moving ahead at a rapid annual rate from the low point they are
today. I believe Facebook is a compelling buy today, given it is
the same company that so many clamored for at twice today's price a
few months back.
is another company whose shareholders have been taking it on the
chin. Since originally trading at over $25 per share when it went
public in November, 2011, it went to as low as about $4 per share
in early September and has rebounded slightly since, to about $5.00
The story with Groupon is quite familiar. The company when
privately held grew at an astonishing rate. Then, upon going public
to "cash out" the idea of actually running the business seemed so
much more difficult than building it. As a result of rule changes
many upper level along with revenue generating lower level
employees have left Groupon in recent months.
Groupon has made moves to expand beyond its core one day coupon
model. "Groupon Goods" is already available in its markets, and the
company has made inroads to move into payment processing and
restaurant reservations as well. As with Facebook, with the
excesses already squeezed out of the stock price, I like Groupon at
these levels. Analysts have the company turning small profits this
year and not quite as small next year. Any sort of sustained
profitability will be a good sign for the stabilization of this
company. This would be a top choice for speculative investors.
All these companies are products in whole or part of the
internet age. If your young company wants to take advantage of the
quickly growing internet economy, an attractive web site is
essential. For that, I suggest you consult a company such as
Template Monster. At
, anyone can create the website of their dreams by choosing the
business type, color pattern, icons, and all other details for a
very modest price.
Brick and mortar stores have seen their days. With very rare
exceptions, there will be little growth from that sector. But
internet commerce will undoubtedly grow at double digit rates for
years to come, and it is far from too late to hop aboard.