Morgan Stanley Drops Ratings On Some Internet Stocks

Morgan Stanley this morning disclosed in a series of research notes that it has removed its ratings on� some smaller Internet stocks. It has move Overstock.com (OSTK), Dice Holdings (DHX), Drugstore.com (DSCM), MercadoLibre (MELI) and Digital River (DRIV) all to “not rated.”

Here’s now Internet analyst Mary Meeker explains the moves in her notes:

• OSTK: “Moving to Not-Rated from Underweight as we lack conviction due to the changing competitive landscape for the liquidation of retail inventory.”
• DHX: “Moving to Not-Rated from Equal Weight as we lack conviction in share price valuation…We believe Dice Holdings has an attractive subscription-based business model that serves several attractive job verticals (technology, financial, healthcare, energy, security). That said, the global economy remains challenged which constrains the need for online recruitment.”
• DSCM: “Moving to Not-Rated from Equal Weight as we lack conviction in the pace of revenue growth among Drugstore.com’s recent partnerships. We believe that Drugstore.com has a stable core business and revenue upside could come from recent partnerships. However increased competition from larger eCommerce players and moderating growth within the vision segment could create challenges.”
• MELI: “Moving to Not-Rated from Equal Weight as we lack conviction in share price valuation … Mercadolibre is the eCommerce leader in Latin America and potentially poised to benefit from the under-penetrated eCommerce market. MecadoPago, its online payment platform, continues to report momentum boosted by the launch of Pago 3.0. However, concerns around political and foreign exchange risk could linger due to the markets Mercadolibre serves.”
• DRIV: “Moving to Not-Rated from Equal Weight as we lack conviction about the company’s ability to sign new partnerships to offset the loss of Symantec. Digital River appears well positioned in its niche and, in our opinion, does not have any true direct competitors, but lacks clear catalysts going forward. Going forward, we believe execution in strategic growth areas will be key to potential stock upside but customer exposure could continue as current customers expand relationships.”