Internet Stocks: J.P. Morgan Cuts Ests On Stronger Buck; Also Lowers Outlook For Display Advertising Spending

Imran Khan, analyst at J.P. Morgan, this morning issued a pair of cautionary reports on the prospects for Internet stocks, one focused on weak ad spending, the other addressing the impact of a stronger U.S. dollar.

In his piece on the outlook for ad spending, Khan noted that macro weakness has already “spilled into the Internet sector,” but that “the weakness became more pronounced in Q3 and is spreading to international markets.” He thinks the biggest hit will be in display advertising. “As advertisers become more conservative with their ad spend, we think that the long-tail advertisers will shift toward performance-based advertising forms,” he says. Khan cut his forecast for 2008 U.S. display ads to $8.2 billion, from $8.6 billion, a reduction in expected growth to 14% from 20%. He reduced his ‘09 market estimate to $9.4 billion from $10 billion.

Khan sees a more m