Internet services companies are poised to enjoy a boom in the coming months, according to online investment bank WR Hambrecht & Co. In a report on the industry, the bank says companies in the sector should post strong results and buoyant stock prices for the next couple of quarters as US corporations continue to move onto the internet.
The bank, however, raises questions of slowing growth in the longer term and expects quality of operations issues at some companies to emerge by next summer, leading to contracting valuations and increased valuation divergences which will effect a general shake-out.
The report urges investors to focus on those companies creating the building blocks for scalable growth by investing in infrastructure. Hambrecht expects the aggregate pure play market capitalization in the industry to exceed $50bn in five years, while the largest market cap among the public companies in the sector is only about $4bn today.
