MIZUHO SECURITIES USA INC. | US EQUITY RESEARCH
Initiating on the Internet & Interactive Entertainment Sectors
Summary
The pace of technology evolution over the past 20 years seems far more substantial than the prior 30 years and we believe that the next 10 years will be just as, or even more, critical for many Internet companies. In this report, we outline our R.A.M.P framework for how we think about Internet stock investing. We also share our 1,000 person mobile survey results which show that the companies with the largest scale and breadth on the desktop, appear to be winning on mobile.
Key Points
R.A.M.P: Our our investment framework for the Internet – We are big fans of tacky acronyms, so we have a new one for you – R.A.M.P. This includes: new Revenue sources that could add billions of incremental dollars to the topline; large Audiences, where companies can achieve network effects by serving new products and services to its large and growing audience base; Margin expansion - which is key for profitability but not when there is large share to be gained; and Platform extensibility - how successful are companies in expanding into new platforms like Virtual Reality, Payments, Video, etc. While our ratings do not coincide 100% with our framework, R.A.M.P helps us think through the long-term potential for each of the Internet stocks we are covering.
Proprietary Mobile Survey – We surveyed over 1,000 U.S. Smartphone users to understand how they are using their devices, and where there are opportunities for online business models. Key findings: a) Search isn’t dead, as the vast majority still use Google for mobile search queries; b) Texting and email are the two most popular activities on the Smartphone. Search and Social were virtually tied; c) Facebook and Instagram are the two most popular social sites, but Twitter, Pinterest, Google+ and LinkedIn were neck- at-neck in terms of popular social networks; d) 45% of users start their mobile shopping experience on Amazon while 16% start on Google; e) 15% of respondents used PayPal for mobile payments while only 3% used ApplePay or Google Wallet, f) and 80%-90% of people surveyed said they have not used a on-demand service in the past month (like Uber, Thumbtack, Postmates, etc.). Overall, this survey was positive for Facebook, Amazon, PayPal and Google.
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