What These Internet Companies Had to Say at the TMT Conference

Zain is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

The Tech, Media and Telecom (TMT) conference was recently hosted by J.P. Morgan where different Internet companies presented their case. Investors felt enthusiastic after hearing bullish comments from management teams of the respective companies. However, the bullish picture wasn’t new for the investors. The same companies kept reinforcing this idea in their respective earnings calls just a couple of weeks back.

What did they have to say?

Management comments

Pandora Media’s (NYSE: P) management comments and tone were positive in the conference. Pandora is a compelling long-term play on mobile advertising. It is further reducing buy-side friction with proprietary software integration that makes sales more seamless. The management was positive on monetization progress and the intended impact from the mobile listening-hours cap. Its sales force growth is also encouraging, especially for mobile, as Pandora builds out feet on the street in all targeted markets and addresses other markets with inside sales teams.

A bullish story on this company might surprise many given that the stock price has already inflated 104% for the year! However, it is interesting to note that as already mentioned, the stock has a lot of room to move upward especially given the re-rating of the multiple by the market. Also, “not surprisingly” Pandora was upgraded by four sell-side companies in the May 20 through May 24 period this year.

New initiatives make MercadoLibre an attractive shot

The management at MercadoLibre (NASDAQ: MELI) is optimistic on the outlook for growth in e-commerce in Latin America (which will help to boost company’s sales), and its new initiatives (Pago, shipping, verticals, mobile) are having good traction with users. For those who have heard this name for the first time, MercadoLibre is the largest online-trading platform in Latin America.

It is a market leader in e-commerce in each of Argentina, Brazil, Chile, Colombia, Ecuador, Mexico, Peru, Uruguay and Venezuela based on unique visitors and page views. Additionally, it recently launched online-trading platforms in Costa Rica, the Dominican Republic and Panama. With a market of over 550 million people and a region with one of the world’s fastest-growing Internet penetration rates, the company provides buyers and sellers a robust online trading environment that fosters the development of a large and growing e-commerce community.

More competition in Latin America could be positive, as most of Mercado’s growth comes from taking share from off-line players, not online, and new players should incentivize this migration.

Is there any other stock that has doubled for the year?

If you are thinking that the list for the companies doubling their market caps this year starts from Tesla Motors and ends at Pandora, you are wrong. You are missing Netflix (NASDAQ: NFLX), which has seen its stock rise by 208% in the last 12 months. The stock has been a super example of a short-squeeze. Without further digression, I must point out what the company’s management had to say at the TMT Conference.

Netflix was positive on brand image progress since the pricing disruption in 2011. The company expects to continue to invest in original programming, potentially moving well beyond seven original shows over the next several years. Netflix notes it typically makes content investment decisions based on cost per hours viewed, ascribing a higher value to original or exclusive content. The management believes current pricing is appropriate and expects it to remain stable in the U.S. in the intermediate term.

Final word

The Internet space has been rewarding for investors with generous gains from investments in certain companies. And it is interesting to note that this might not be the end to the rally – in fact this might be the start of another round of capital appreciation and multiple re-ratings for the industry with Pandora and Netflix being the prime examples. Hence, I recommend investors to take long positions on both Pandora and Netflix.

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Zain Abbas has no position in any stocks mentioned. The Motley Fool recommends MercadoLibre, Netflix, and Pandora Media. The Motley Fool owns shares of MercadoLibre and Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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