Barclays On Internet Names: 'Can Leadership Continue?'

• Shares of Alphabet Inc GOOGL, Facebook Inc FB and Amazon.com, Inc. AMZN have declined since the beginning of trading in 2016.
• Barclays’ Paul Vogel believes that all three companies are set to deliver strong 4Q results.

Analyst Paul Vogel mentioned that investors are concerned about the relative strength of big players in the Internet space, like Google, Amazon, Facebook and Netflix, Inc. NFLX. The stocks of these companies led the internet sector in 2015, besides being leaders within the wider market.

Vogel expressed confidence on the ability of these Internet companies to deliver strong 4Q results, saying, “[W]e have some concerns on NFLX sub growth in 4Q - although with 2016 subs moving higher, it may not be a big issue.”

Google

The analyst believes that investors are the most optimistic about Google as the 4Q disclosure around core and other bets is being viewed as a catalyst for the shares. The stock is the least expensive among the big names and has seemingly lower hurdles relative to expectations.

Facebook

Although investors are generally constructive on Facebook, they are worried about the high expectations and operating expenditure guidance for 2016, Vogel said.

Amazon

While the investors are generally positive about Amazon, they are worried about tough comps at AWS.

LinkedIn

Vogel mentioned that the “stocks that worked last year” showed accelerating trends throughout 2015, resulting in tough comps for 2016. Of the various Overweight rated stocks, only LinkedIn Corp LNKD faces relatively easy comparisons over the first three quarters in 2016, the Barclays report added.

“For LinkedIn, we have become increasingly more positive and we believe the set up in 2016 is very solid as their hiccup from last year sets them up well into 2016,” the analyst wrote.

Twitter

Vogel expects Twitter Inc TWTR to report decent 4Q results, while there is concern over the company’s 2016 guidance, given the material decline in its core advertising in the past four quarters. He commented, “The stock has been hit hard to start the year so any good news may cause some modest relief in the shares.”