Citi Raises Targets Amazon, Facebook, Priceline, eBay

The internet sector was a major winner throughout 2017 and some Wall Street analysts are expecting more of the same in 2018.

The Analyst

Citi's Mark May maintained a Buy rating on the following stocks, with price targets revised higher:

• Amazon.com, Inc. (NASDAQ: AMZN): price target boosted from $1,250 to $1,400.
• eBay Inc (NASDAQ: EBAY): price target boosted from $43 to $46.
• Facebook Inc (NASDAQ: FB): price target boosted from $210 to $215.
• Priceline Group Inc (NASDAQ: PCLN): price target boosted from $2,050 to $2,120.

Amazon

• A high growth profile in a high margin business (AWS, advertising, etc) bodes well for Amazon's retail business is valued only at 2.9x gross profit versus 3.2x for traditional domestic retailers.
• 2018 should see Amazon expand into newer categories like healthcare and pharmaceutical.
• Margins are now expected to expand in 2018 after declining in 2017.
• Amazon's tax rate stands at 37 percent and the company could see the "most direct impact" from the recent tax reform.

eBay

• eBay's core U.S. Marketplace Transaction revenue growth has improved from 0 percent in 2015 and negative 1 percent in 2016 to positive 8 percent for 2017.
• eBay's growth is "modest" at just 5 to 10 percent, but its valuation is also "relatively low" at current levels.
• eBay could benefit from changes to the corporate tax structure as it has a high effective rate in the U.S.

Facebook

• 2018 will likely prove to be an "up year" for the entire ad market from the World Cup, Winter Olympics, and U.S. midterm election.
• A premium video offering could prove to be "materially positive" and accretive to earnings.

Priceline

• Priceline's recent slump in room night growth from 25-30 percent to around 20 percent is due to the company's pullback of inefficient marketing channels and tougher comps rather than any secular issue.
• Growth rates should stabilize in 2018.
• A decision to cut back on marketing spend could prove to be a tailwind to margins.

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