RBC's Favorite Internet Stocks

As a part of a bus tour through Seattle, RBC Capital analyst Mark Mahaney met with executives and representatives from several Internet companies. Mahaney provided an update on these companies including Amazon.com, Inc. AMZN, Expedia Inc EXPE, and Zillow Group Inc Z.

Mark Mahaney is ranked #22 out of over 3,600 analysts on TipRanks. He currently has a 63 percent overall success rate recommending stocks with an average return of +22.1 percent per recommendation.

Amazon.com

After meeting with Amazon representatives, Mark Mahaney believes that Amazon’s North American consolidated segment operating income, or CSOI, should be able to expand due to improvements made in fulfillment methods, sourcing, and marketing. Furthermore, the analyst views Amazon’s Prime Instant Video leverage, basic leverage against G&A expenses, and the increased price of a Prime membership as factors lending towards an increase CSOI.

Mahaney continues to note that Amazon’s AWS segment remains “the clear market leader in the cloud computing segment” and that it should experience acceleration in revenue growth this year. As for expanding internationally, the analyst notes that Amazon “appears committed to the India and China markets, although it continues to fine-tune its options within China.”

Mark Mahaney currently has an Outperform rating on Amazon with a $500 price target. Mahaney has rated Amazon 33 times since April 2009, earning a +26.2 percent average return per AMZN rating.

Expedia

Mahaney remains bullish on Expedia for several reasons. First, he notes that Expedia’s hotel commission rates are closing in on market rates, but assures that will not “usher in a ‘race to the bottom’” for prices. Trivago, the hotel comparison search engine, is growing in the U.S. Expedia owns over 60 percent of Trivago and Mahaney notes that Expedia will “have options to buy the remaining portion of [Trivago]” in the next few years.

Expedia is selling its majority stake in eLong, a Chinese travel website, but Mahaney assures that “Expedia will have access to Chinese inventory” following the sale. The analyst concludes, “China could be the largest outbound market in the near future.” Mahaney is “pleased that EXPE is in a position to capitalize on this after divesting its primary Chinese asset.”

Mark Mahaney currently has an Outperform rating on Expedia with a $130 price target. He has rated the stock 15 times since March 2009, earning a +41.4 percent average return per EXPE rating.

Zillow

Mahaney’s meeting with Zillow focused on challenges stemming from its Trulia acquisition. The “long acquisition approval process caused something of an atrophying among both Trulia customers and employees,” making the process more cumbersome than anticipated. Looking forward, Zillow believes that advertising product integration with Trulia will be concluded by the end of this year. Zillow is optimistic regarding growth and revenue potential.

By providing improved agent training, Zillow believes it can “boost conversion rates among leads.” The company also sees potential in New York City real estate as a “multi-hundred-million-dollar opportunity long-term.”

Mark Mahaney currently has a Sector Perform rating on Zillow with a $103 price target. Mahaney has rated Zillow 12 times since August 2011, earning a +30 percent average return per Zillow recommendation.