Citigroup Comments On The State Of The Internet

Following the 1Q earnings season, Citi’s Mark May recommended sticking to a select group of large-cap Internet stocks, naming Amazon.com, Inc. (NASDAQ: AMZN), Alphabet Inc (NASDAQ: GOOGL) and Facebook Inc (NASDAQ: FB). The analyst also noted improving sentiment among a select group of SMID caps.

“We remain particularly positive on AMZN and FB both in the near- and long-term, view GOOGL as a relative safe haven,” analyst Mark May wrote. He added that there were some names in the SMID space that represented “continued near-term opportunity,” such as GrubHub Inc (NYSE: GRUB) and Yelp Inc (NYSE: YELP).

May pointed out that shares of Netflix, Inc. (NASDAQ: NFLX) had risen on hopes of a partnership with Comcast Corporation (NASDAQ: CMCSA), while shares of LinkedIn Corp (NYSE: LNKD) had been boosted by confidence in its near-term estimates.

The analyst commented that Internet stocks had been driven by some investors chasing momentum and buying into companies that appear poised for revenue acceleration, margin inflection and/or positive earnings surprises. He added, “While many of these stocks are now at or near price objectives, the market backdrop remains constructive, Internet fundamentals remain strong, and most valuations remain reasonable.”

Buy-Rated Picks

Citi has Buy ratings on the following stocks and named them in preference order:

• Amazon – PT: $780
• Alphabet – PT: $900
• Facebook – PT: $141
• eBay Inc (NASDAQ: EBAY) - PT: $33
• GrubHub - PT: $30
• Yelp - PT: $27
• Godaddy Inc (NYSE: GDDY) - $35