remains a top internet stock pick by New Street Research, but now ranks higher than
and Netflix, according to the firm.
New Street put together a list of seven internet stocks that its analysts rate between top picks and least favorite names in the space. When the firm initiated the list in January,
(ticker: AMZN) was the top pick, followed
(GOOGL), Meta (META), Snap (SNAP),
(TTD). On Monday, that order changed notably.
“We recommend investors get greedier and so we increase the risk/reward profile of our recommendations,” New Street analyst Dan Salmon wrote in the research note. Google parent
is now the firm’s top pick, followed by Match, Amazon, Snap, Meta, Netflix, and lastly
Moving Snap above the behemoth Meta in a list of tech stocks is a bold move. In 2022, Snap stock fell 81%, while Meta finished the year down 64%. Both stocks have climbed higher so far this year, with Snap up 38% and Meta rising 56%. But the two companies’ latest earnings reports were received quite differently by investors: Shares of Meta jumped after investors celebrated management’s cost-cutting plans, while Snap shares dropped following weaker-than-expected results.
In late January, Snap reported a fourth-quarter adjusted loss that was wider than analysts’ estimates. The company cited “macroeconomic headwinds, platform policy changes, and increased competition,” as reasons for its disappointing performance. Snap also expects these headwinds to continue into the current quarter.
Meta, on the other hand, told investors last week that it is focusing more on cost cuts, and reduced its forecast for full-year total expenses. The stock jumped news.
Despite these contrasting results, Salmon moved Snap higher than Meta on New Street’s list of internet stocks, and raised his price target on shares of the
parent to $14 from $12. The analyst maintained his Buy rating.
“META swaps positions with SNAP in our pecking order, largely owing to stock price outperformance,” Salmon wrote. He also raised his price target on Meta, to $220 from $145 and maintained his Buy rating on the stock.
He added that while falling U.S. engagement for Snap is a key risk, “we think revenue growth can rebound more than the Street expects in 2023 as (like META) new ad product gains traction, and profitability and margin expansion are reinvigorated.”
Shares of Snap declined 0.7% Tuesday to $11.99. Meta stock was down 0.5% to $185.09 in recent trading.
Write to Angela Palumbo at firstname.lastname@example.org