As you look through the different stock market sectors there has been carnage everywhere over the last two months as stock markets all over the world first predicted then reacted to a global economic slowdown. Today I want to focus on a couple of Internet stocks that were high flyers a year ago and now have fallen hard, but their business models should continue to provide growth in tough economic times.

When you start thinking about Internet stocks several companies come to mind that have made (and lost) fortunes for investors: Google (GOOG), Yahoo (YHOO), Amazon (AMZN) and EBay (EBAY). Each of these companies has taken unique aspects of the Internet and turned their vision into multi-billion dollar business that have changed how we shop, search and generally view commerce. The recent stock market turn down has knocked 60% to 75% off the recent highs of these stocks. With these large, established Internet companies taking these kind of discounts, I want to focus on a couple of smaller, newer Internet companies that have seen their stocks fall by even larger percentages.

Mercadolibre, Inc. (MELI) is a Latin American version of Ebay. Mercadolibre offers online trading and sales portals in a dozen Latin American countries, with sites tailored to each country's taxes and currency. The Argentina based company went public in August of 2007 at $22 per share. By the end of 2007 the stock had cleared $80. Since the  2007 peak, MELI stock has fallen by 85%. In the meantime revenues have been growing at a 16-18% rate per quarter and the recently announced 3rd quarter earnings of 13¢ per share nearly doubled the 7¢ from a year earlier. Analyst guesstimates have earning almost doubling again in 2009 to 66¢ per share. This puts the stock at a pretty reasonable 15 times forward earnings. MELI gives an investor exposure to a region where broadband internet access is just getting a toehold and there is a rapidly growing middle class.

Gigamedia, Ltd. (GIGM) offers multi-language poker and casino gambling to the European markets and offers a multitude of online games in Asia. GIGM stock was above $24 a little over a year ago and has fallen almost 80% since. Gigamedia's established European poker business continues to generate 30% per year revenue and earnings growth and the company has just started offering different market-tailored games in Japan, China and other parts of Asia. The opening of business into new multi-billion person markets plus the recession resistance of the company's gaming and gambling offerings should bode well for future growth. This is a company that at a $1 billion market cap I thought would soon be a $5 billion company and now it is a $290 million company. GIGM has consistently beat analyst estimates and I am looking forward to tomorrows earnings release. 
 

If you are looking for small cap companies with international exposure and prospects for strong continued growth I recommend you do some of your own research into MELI and GIGM. These two companies have great stories that the market has ignored and forgotten.