• by Joe Mandese , January 2, 2008

In the first major Wall Street outlook for the Internet sector of the New Year, the equities research team at JPMorgan predicts the major publicly traded Internet publishers, portals, commerce sites and search engines will continue to outpace the performance of the overall stock market by wide margins through 2008. While revenue growth for the online sector is expected to "decelerate" slightly, JPMorgan analyst Imran Khan and his team predict the earnings of Internet companies will grow more than four times faster than those of the overall stock market during 2008.

"We expect revenue growth to decelerate to 21.2% in 2008, from 25.6% in 2007," Khan wrote in the report released early this morning. "We are projecting 34% earnings growth for our coverage universe, compared to 8% for the S&P 500."

Khan, who has scheduled a briefing on his outlook for later today, also wrote that he expects online ad CPMs (cost per thousands) to "accelerate" during 2008 due to two big factors: a "tighter" supply of advertising inventory from major offline media outlets; and "better monetization techniques" from online publishers.

Khan also revised his outlook for the global search advertising marketplace in 2008, predicting worldwide search revenues will rise to $30.5 billion from $26.2 billion in 2007. He attributed the growth to "strong volume trends, better-than-expected monetization, and continued robust growth in Continental Europe." Khan said search advertising will grow at an annual rate of 28% over the next four years, and would reach $60 billion by 2011.

JPMorgan reaffirmed its top Internet stock picks for 2008, selecting shares of Google, Yahoo, Expedia, Omniture, Shutterfly, and Monster.com as "overweight" recommendations.