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Tech Giants Discount Buy Opportunities
November 16 2018 - 3 ‘Top’ Internet Picks: JPMorgan By Investopedia
The recent sell-off in shares of some of the latest bull market's top performers could present an opportunity to buy tech giants at discount, according to one team of analysts on the Street.
In a note to clients on Thursday, JPMorgan's Doug Anmuth listed Facebook Inc. (FB), Amazon.com Inc. (AMZN) and Twitter Inc. (TWTR), as his “top picks” in the beaten down tech sector, as outlined by Barron's. He noted that since Netflix Inc. (NFLX) reported its disappointing quarterly results in mid-October, seen as the unofficial start of the recent tech downdraft, just five out of the 28 internet stocks in his firm's coverage have posted positive returns. The group of tech stocks has fallen 9% since mid-Oct., three times as far as the S&P 500.
"Overall sentiment on the group remains mixed, with growth and regulatory concerns weighing on the large-caps, and investors increasingly wary of [small- and] mid-caps, given a number of sharp earnings-driven declines," wrote Anmuth.
Facebook User Base 'Stickier Than Most Believe'
JPMorgan downplayed risks facing Facebook, which has seen its shares fall a whopping 34.5% from their 52 week high.
"We acknowledge ongoing concerns around engagement and shifting social behavior, but we view the two billion-plus user base as stickier than most believe,” wrote Anmuth. The bull views the media giant's top line deceleration as "manageable," applauding Facebook's recent initiatives to improve ad products and drive better returns. Plus, "marketers do not have good alternatives to Facebook’s scale and return on investment," he added.
Amazon Cloud, Advertising to Drive Returns
As for Amazon, Anmuth is upbeat on continued strength in its core retail business and expects accelerated growth in the first quarter of 2019. While the Street was disappointed with slowing revenue growth and guidance from the e-commerce giant in the most recent quarter, JPMorgan forecasts booming profits for Amazon Web Services (AWS) and advertising to offset downside from higher wages and free shipping in the U.S.
Twitter's Comeback Isn't Over
Shares of Twitter, which have managed to jump 15% in the recent one month period and 38% YTD, should continue to outperform the broader market as the firm successfully makes improvements the quality of content on its platform.
"Twitter’s platform is strengthening as product improves, and heightened health work efforts will be positive for both users and advertisers over time,” wrote Anmuth. “Twitter is becoming increasingly relevant to large advertisers, particularly through video.”
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