JMP Securities Weighs in on 10 Internet Names, Which Ones Are Worth Buying?
JMP Securities released a stack of coverage initiations on the tech sector Tuesday morning, specifically focusing on web based e-commerce, social, and advertising based companies.
Overall, the reports were bullish on the sector. Below are some highlights of the individual ratings themselves.
First up, are the Market Outperform ratings:
JMP Securities kicked things off by giving eBay (NASDAQ: EBAY) a Market Outperform rating and $67 price target.
The report stated that eBay is effectively utilizing newer mediums such as mobile, local payments, and advanced networks to reach its customer base. Its price target is based on a 20x multiple of forward earnings, justified by the growth in eBay's offline transactions and improving fundamentals.
Next up on the Market Outperform list was Google (NASDAQ: GOOG), which was given a $955 price target.
In its report, JMP noted that it valued Google at a 17.5x multiple, a discount to its average forward multiple since 2008. Motorola's march towards profitability and the increase in mobile monetization were both highlighted as sources of earnings growth, capable of pushing the stock back to its old forward multiple of 19-20x.
Priceline (NASDAQ: PCLN) also made the Market Outperform list, rated with an $850 price target.
With a projection that has Priceline overtaking Expedia (NASDAQ: EXPE) as the largest online travel agency, the report certainly does not hold back. Citing trends in the world market to shift more towards online bookings, the report states that not only will its market grow, but that Priceline is effectively increasing its market share.
Its price target sets the company's forward earnings multiple at 17.5x, a discount from its traditional multiple of 20.5x, showing slight hesitation to go all in on the rating.
Also on the list of Market Outperform ratings was AOL (NYSE: AOL), which was given a $44 price target by the firm.
The note stated that it believes AOL is positioned as well as it ever has been since its spin off from Time Warner (NYSE: TWX) in 2009, partially due to its heavy exposure to online video and programmatic ad buying.
Its valuation, which grants AOL a 5x multiple, comes in above that of competitor Yahoo! (NASDAQ: YHOO) and is predicated on the case that AOL is further along in its transition to overall company health and profitability.
The final name making the Market Outperform list was Zillow (NASDAQ: Z), which was given a $58 price target.
A strong value proposition and potential to unify the real estate market was highlighted as a strong driver of valuation and interest, while its continued diversification also provided interest. It's valuation was justified on a “large opportunity” in online real-estate and a strong management team.
Moving on to the Market Perform ratings, which appear to have received less love in the markets.
First up was Expedia, which was cited as less than attractive simply from its current valuation at 16.2x the company's forward predictions.
Next on the list was Amazon (NASDAQ: AMZN), which got its rating simply on the roughly 25 percent market share the company currently controls. The report doesn't believe much further market penetration can be achieved, which will cause earnings growth to slow considerably.
Third was the IPO disaster itself; Facebook (NASDAQ: FB). While the report mentioned it was positive on the potential of social, it was hesitant on the lack of adoption of social media advertising from many large corporate names.
Yelp (NASDAQ: YELP) was next up, and got a positive mention for its growth so far. The company's lower than anticipated market penetration of local businesses provided some hesitation though, as did its lack of tangible signs of leverage within its business model.
Finally, was Yahoo. The report took a refreshing angle, focusing on the company's actual operations for once as opposed to its valuation and the valuation of its stake in Asian assets. On that topic though, it valued the company's current stake in Alibaba at under $6 per share, hardly a bullish outlook.
Overall, none of the ratings really stuck out that much other than the note on Yahoo!, which for once focused on the company itself rather than its assets that it will likely sell within a year or two.
The reports may not have given a screaming Buy thesis to any particular equity, but if one was to find the macro theory compelling, tech ETFs such as the Technology Select Sector SPDR (NYSE: XLK) could provide a good vehicle to get into tech before you're ready to make individual stock picks.
The Technology Select Sector SPDR traded down 0.60 percent today to $30.03.
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