UK and European internet companies have underperformed materially so far in 2022, dragged down along with the Big Tech behemoths across the Atlantic, but JPMorgan still spies value in the sector.
The investment bank said bombed out Deliveroo PLC (LSE:ROO) was the UK name with the best risk/reward in the space, while Rightmove PLC (LSE:RMV) was downgraded to an effective 'sell' rating from a previous 'neutral' stance.
What is traditionally a long-duration sector "has been heavily impacted by fears of rising interest rates combined with negative effects from re-opening", JPMorgan said in a note to clients on Wednesday.
"High-multiple and unprofitable names have been hit the hardest (down >30%) and, with our strategists continuing to expect rising yields, headwinds are likely to remain."
In this market environment stock-picking has become more complex, the bank said, with volatility in tech valuations and M&A expectations increasing.
Putting the sector through a new stock screen, as well as Deliveroo, the best risk/reward was seen at Delivery Hero, Scout24, Ströer, Kahoot! and Adevinta.
There was more caution for Rightmove as "risk/reward is less compelling", resulting in an 'underweight' rating, which was also reiterated for Auto Trader Group PLC (LSE:AUTO).