September 4th, 2008
Analyst: Dollar daze around the corner for Web giants
J.P. Morgan analyst Imran Khan said Thursday in a research note that a stronger dollar will take a bite out of search, online travel and e-commerce companies.
Khan’s call (Techmeme) largely focuses on the fourth quarter given the dollar’s resurgence began in the middle of the third quarter. A stronger dollar pares growth for companies with a big chunk of sales abroad. Khan’s note, “revenge of the greenback,” is likely to be one in a big chorus of calls in upcoming weeks. As previously noted, estimates for many technology companies are likely to come down amid the dollar’s rebound. For instance, revenue collected in euros boosts growth when converted to what used to be a weakened dollar.
The report focuses on companies like Google, Amazon, eBay and others where roughly half of sales coming from overseas. Khan’s general thesis is that a stronger dollar coupled with a slow U.S. economy will pinch results. Why? The dollar is strengthening because the U.S. looks less worse than economies elsewhere (on the bright side we’ve take our whack already).
Here’s the breakdown of the estimate changes (click for larger image):
Google and Priceline are expected to be among those taking the largest hit. Regarding Google Khan noted that more than half of Google’s revenue comes from abroad. Google also has “significant exposure” to the British pound, which has fallen along with the euro relative to the dollar.
Priceline may also take its lumps over a stronger dollar because 60 percent of its travel bookings come from abroad.
Larry Dignan is Editor in Chief of ZDNet and Editorial Director of ZDNet sister site TechRepublic. See his full profile and disclosure of his industry affiliations.
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