Internet
stocks
in
Europe
are
set
for
gains
in
2024
—
thanks
to
improving
fundamentals
and
falling
interest
rates,
according
to
Morgan
Stanley.
The
Wall
Street
bank’s
analysts
said
they’re
“positive
on
the
sector”
because
of
customer
growth,
cost
discipline
at
companies,
and
valuations
being
supported
by
declining
interest
rates.
The
optimistic
view
on
tech
and
internet
stocks
comes
after
a
difficult
2023,
when
worries
over
slowing
growth,
inflation
and
higher
interest
rates
battered
the
sector.
According
to
the
bank,
the
median
European
internet
stock
rose
just
11%
in
2023,
lagging
behind
the
broader
European
market’s
13%
gain.
Morgan
Stanley
named
food
delivery
services
companies
Deliveroo
and
Delivery
Hero
,
global
tech
investor
Prosus,
online
marketplace
Scout24
,
digital
learning
company
Pearson
,
and
travel
app
Trainline
among
its
“most
preferred”
or
favored
stocks,
citing
significant
upside
potential.
All
six
stocks
are
also
traded
in
the
U.S.
over
the
counter.
Delivery
Hero
For
the
Germany-listed
company,
Morgan
Stanley
set
a
price
target
of
40
euros
($44),
which
implies
a
71%
upside
from
the
current
share
price.
Shares
in
Delivery
Hero
have
fallen
in
the
past
three
consecutive
years
and
are
now
trading
28%
below
its
2017
initial
public
offering
price,
according
to
FactSet
data.
The
company
burned
through
cash
chasing
global
growth
while
facing
stiff
competition
from
local
players
and
global
giant
Uber.
However,
the
company
is
now
closing
operations
abroad
—
most
recently
in
Taiwan
and
Turkey
—
to
cut
costs.
Delivery
Hero’s
“portfolio
consolidation”
is
also
seen
as
a
potential
catalyst
this
year,
which
is
not
yet
reflected
in
the
current
share
price,
according
to
Morgan
Stanley
analysts.
“Cost
base
now
right
sized,
accelerating
growth
in
2024
driven
by
volume
recovery
and
advertising
products
should
drive
operational
leverage
and
cash
generation,”
the
bank
analysts,
led
by
Miriam
Josiah,
said
in
a
note
to
clients
on
Jan.
3.
Deliveroo
The
investment
bank
set
a
price
target
of
150
British
pence
on
Deliveroo,
implying
a
17%
upside
from
current
levels.
U.K.
shares
are
generally
priced
in
pence,
with
100
pence
equal
to
one
British
pound
($1.26).
The
analysts
said
Deliveroo
nears
free
cash
flow
breakeven
in
2024,
“which
should
underpin
investor
confidence
in
the
sustainability
of
the
food
delivery
model.”
The
dual-class
share
structure
that
gave
founder
Will
Shu
outsized
control
also
expires
in
early
2024,
meaning
control
will
shift
to
a
broader
shareholder
base,
which
could
remove
an
overhang
on
the
stock,
according
to
Morgan
Stanley’s
analysts.
Prosus
The
investment
bank
set
a
price
target
of
43
euros
on
Prosus,
giving
it
58%
upside.
The
investment
holding
company’s
primary
asset
is
a
28%
stake
in
Chinese
tech
giant
Tencent.
Tencent
is
Morgan
Stanley’s
“top
pick”
within
Chinese
internet
stocks
for
2024.
Elsewhere,
Prosus’
e-commerce
businesses
outside
of
Tencent
are
now
also
profitable,
according
to
the
Wall
Street
bank,
which
it
said
“should
clear
the
path
to
future
value
creation”
in
the
stock.
—
CNBC’s
Michael
Bloom
contributed
reporting.
