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Barron's: 7 Internet Stocks to Buy for 2020

Barron's: 7 Internet Stocks to Buy for 2020

By    |   Monday, 30 December 2019 07:05 PM

RBC Capital analyst Mark Mahaney recently offered seven top internet stock picks for the new year.

His picks come as ains in technology shares sent the Nasdaq Composite Index above 9,000 for the first time.

The veteran internet analyst sees internet demand only continuing to rise, multiples for the highest quality names have been consistent and investment in the sector is likely to remain heavy for many years.

Mahaney recently published a 53-page report on the outlook for the internet sector, offering a wealth of insights on the state of the online world and a collection of stock picks cited by Barron’s.

  1. Uber (UBER): “We see potential for material upside now that we are beyond lockup expiration pressure and path to profitability appears to be proving out,” he writes.
  2. Alphabet (GOOGL): Mahaney cites “extremely consistent/robust fundamentals,” and a potential boost to operating margins as its cloud business expands.
  3. Facebook (FB): “We see Stories monetization as a key driver next year and a potential inflection point in cash flow based on probable tapering in investment spend.”
  4. Spotify (SPOT): Mahaney sees strengthening subscriber metrics for Spotify.
  5. StitchFix (SFIX): The analyst points to 11-straight quarters of 20%-plus organic revenue growth at StichFix — with guidance implying acceleration.
  6. Roku (ROKU): Mahaney sees benefits from the expanding number of streaming services.
  7. Etsy (ETSY): With the stock 6% above its 52-week low, he sees shares as attractively priced.

Betting U.S. economic indicators will point to accelerating growth next year, Wall Street banks recommend investors raise exposure to economically-sensitive sectors and scale back defensive ones.

A Reuters analysis of 2020 forecasts from 14 major financial institutions found that 10 have "overweight" ratings on industrials or financials, sectors that closely track economic cycles.

Another cyclical sectors, consumer discretionary was the next most recommended, with seven overweight ratings, followed by information technology, with six.

That contrasts with the end of last year, when defensive-leaning healthcare tied with technology as the most recommended sector with virtually the same group of banks, and the number of recommendations for the safe-haven utilities and consumer staples sectors grew from the previous year.

Technology, which some analysts classify as a cyclical sector, remains a favorite. Areas such as cloud computing and "the internet of things" present long-term investment opportunities, said Nela Richardson, investment strategist at Edward Jones in St. Louis.

"There's multiple pathways to growth in tech," she said. "Tech has a lot of arrows in the quiver."

The S&P 500 technology index, up more than 45% year-to-date, has led sector gains so far this year, followed by the communication services index, up about 32%, and financials, up about 29%.

Even so, Bank of America downgraded technology to market weight from overweight, and UBS named tech as one of its least-favored sectors globally. Bank of America cited the potential for difficulty in longer-term U.S.-China trade negotiations to split technology supply chains between the two countries.

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RBC Capital analyst Mark Mahaney recently offered seven top internet stock picks for the new year.
barrons, internet, stocks
Monday, 30 December 2019 07:05 PM
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