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Do Your Internet Picks Match Credit Suisse's Picks?

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Do Your Internet Picks Match Credit Suisse's Picks?

  • Stephen Ju of Credit Suisse previewed the Internet sector ahead of the upcoming earnings season.
  • Ju reiterated his top three picks: Amazon.com, Inc (NASDAQ: AMZN), Facebook Inc (NASDAQ: FB) and Alphabet Inc (NASDAQ: GOOGL) (NASDAQ: GOOG).
  • Ju noted that stock performances will "hinge" more on individual company and product-specific catalysts.
  • Stephen Ju of Credit Suisse commented in a note that stock performances will be determined more on individual company and product-specific catalysts versus "overarching" themes. Given the "sheer number" of data points, products and catalysts, the analyst singled out Amazon, Facebook and Alphabet (Google) as his top picks in the sector ahead of their respective third-quarter earnings report.

    Amazon: Bullish Thesis Playing Out

    Ju reiterated an Outperform rating on shares of Amazon with a price target raised to $720 from a previous $700.

    The analyst noted that various positive thesis points have now played out and investor focus will shift toward an operating margin expansion within the retail segment and the "open-ended growth opportunities" for its AWS segment given its now greater scale and pace of innovation.

    Related Link: Social Media Beat: The Three Gs -- GE, Google And Gilead

    Facebook: Measured Pace Of New Products

    Ju reiterated an Outperform rating on shares of Facebook with a price target raised to $115 from a previous $100.

    According to Ju, Facebook's "measured" pace of new product releases will yield "value creation." In the near term, Instagram and Premium Video will begin showing a "greater impact" to the company's financials. Looking past the near term, product launches (such as Oculus Rift) may exert a "modest drag" on profitability (over the short term), but the monetization opportunities will drive upside to estimates.

    Google: Continued ‘Health' Of Search And YouTube

    Ju reiterated an Outperform rating on shares of Alphabet with a price target raised to $815 from a previous $750.

    Ju pointed out that the incremental disclosures surround the Alphabet structure won't be released until the fourth quarter. In the meantime, the company is likely to focus on continued operating and capital expenditure moderation and the "health" of the Search and YouTube segments.

    At the same time, the company will likely show a greater-than-expected contribution from its larger non-search business such as Google Play.

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