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Google, Facebook, Amazon And Priceline Remain JPMorgan's Best Internet Ideas

Google, Facebook, Amazon And Priceline Remain JPMorgan's Best Internet Ideas

Alphabet Inc (NASDAQ: GOOGL), Facebook Inc (NASDAQ: FB),, Inc. (NASDAQ: AMZN) and Priceline Group Inc (NASDAQ: PCLN) remain JPMorgan's best Internet ideas. The brokerage has an Overweight rating on all the four stocks, with price targets of $968, $136, $825 and $1,510, respectively.

Analyst Doug Anmuth said Alphabet remains his favorite overall idea based on its mix of strong growth and reasonable valuation.

Key tenets of his bull thesis include: 1) further acceleration in revenue growth led by the mix-shift to mobile search, and YouTube; 2) Google segment margin expansion, albeit not the 300 bps of 2015 (JPM model ~100bps in ‘16); 3) continued improvements in transparency and disclosure; and 4) balance sheet optimization including share buybacks and higher debt levels.

Facebook is a close second in the analyst's rankings to Google, and the best performing company in his group.

"We believe FB advertising continues to improve, with better targeting driving deeper selection, and ultimately yielding higher ad load without materially impacting the user experience. Instagram's ad load is behind Facebook's, and we expect it to also increase over time," Anmuth wrote in a note to clients.

Video should be a key driver of stronger engagement and monetization. The analyst said 100 million hrs of video are viewed on FB daily, and expects enhanced focus here through suggested videos, live video (competitive to TWTR's Periscope), and premium short-form content.

Meanwhile, Anmuth noted that Amazon has created the best opportunity since pulling back, now down 17 percent this year.

"While 4Q was a bit messy and broke AMZN's string of clean, beat and raise quarters, we believe AMZN remains on track for solid topline growth (we estimate +23% FXN in '16) and modest margin expansion (~120 bps). We believe AMZN's challenges in 4Q were largely driven by high FBA demand (a good problem to have), and we do not expect to see them recur over the next few quarters," Anmuth said.

The biggest topics of discussion around Amazon are: 1) AWS growth and margin sustainability; and 2) potential build-out of shipping and fulfillment capabilities.

The analyst continue to prefer Priceline in the online travel space as it is benefiting from its disciplined approach to building out supply and its customer service. Priceline bounced back strong post-Paris and believe the solid start to the year continues, despite softening hotel data.

"From an investor perspective, PCLN is also much cleaner than Expedia Inc (NASDAQ: EXPE) —a positive in the current environment—as Travelocity, Wotif, and the Air Asia JV roll off, while Orbitz and HomeAway begin to kick in," Anmuth added.

In addition, the analyst remain Overweight on Netflix, Inc. (NASDAQ: NFLX) shares and he do not see any change to its 2020 view of 60 million plus domestic subscribers and 100 million plus International subscribers combining to potentially drive about $10/share in earnings power. The analyst has a price target of $141 on Netflix.

Latest Ratings for AMZN

Mar 2019KeyBancUpgradesSector WeightOverweight
Feb 2019Pivotal ResearchInitiates Coverage OnBuy
Feb 2019Raymond JamesMaintainsOutperformOutperform

View More Analyst Ratings for AMZN
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Posted-In: Doug Anmuth JPMorganAnalyst Color Analyst Ratings Tech Best of Benzinga


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