Internet firms are up nearly 62% year-to-date on a market-cap weighted basis this year against S&P 500 which gained 14%.
Domestic research and brokerage firm Emkay Global Financial Services in its recent note has recommended to sell four Nifty 50 and Nifty Next 50 stocks
In 2020, as the world was restricted to their houses, the internet has been the biggest enabler. Be it working from home, communicating with your close friends, and even shopping for your essentials amidst a pandemic. Wall Street was no different — internet firms were up nearly 62% year-to-date on a market-cap weighted basis this year against S&P 500 which gained 14%, a report by JP Morgan showed. The brokerage firm’s internet coverage universe gained an average of 104% in 2020. The biggest beneficiaries were Amazon, Netflix, Chewy, among others. In 2021 as the world head back to the old normal, internet firm might again be in focus. In such a scenario here are JP Morgan’s best ideas for 2021.
Alphabet the parent company of internet behemoth Google is JP Morgan’s top pick for 2021. In a report, JP Morgan said that continued search and YouTube recovery from the pandemic is why Alphabet may outperform. Margins of the firm have also been stabilising which make way for upside potential. The report said that valuations of the firm are attractive at 24x their ‘22E GAAP EPS & ~21.5x excl. with SOTP support. JP Morgan expectsYouTube ads revenue growth to be at 38%. Currently, the stock trades at $1,734.
Overweight; Target – $330
The report finds Facebook’s valuations to be attractive while expecting the firm to have strong advertising growth w/new surfaces to monetize in 2021. “Advertising revenue poised to accelerate in 1H21 on favourable comps and FB-specific drivers,” the said. Facebook has 10 million advertisers. The firm has a strong product line, including Stories, IG Explore, IG Shopping, Reels, IGTV, FB Shop, FB Pay, FB News. Antitrust investigations and Ad targetting headwinds could be the biggest risks for the firm in 2021. Current the stock trades at $267.
Overweight; Target – $65
JP Morgan said that Twitter could be poised for the biggest rebound in online advertising group with multiple company-specific drivers. Sports events, launches should act as catalysts for the firm. “Activist pressure should increase operational discipline & strengthen governance, while share buybacks also support the stock,” they said. In 2020, shares of Twitter have jumped 67% so far. JP Morgan expects total revenue growth for Twitter to be 23%.
Overweight; Target – $145
The exercise equipment and media firm is well-positioned to capture the covid-19 situation and remains a good bet even in the post-pandemic world. “We expect strong lower-priced Tread demand, which has a market opportunity ~2-3x that of the Bike,” JP Morgan said. Peloton has a digital subscriber base of 500k. The brokerage firm sees significant growth runway with ~183M global gym members, which implies 2% penetrated for Peloton. In 2020, stock of the firm gained 447%.
Overweight; Target – $64
Lyft, a ridesharing application has seen its stock price gain merely 12% this year. JP Morgan said that they expect rideshare to come back strongly in the second half of 2021. “Expect majority of NA population to be vaccinated by 1H21, and shared & airport rides to come back,” they said. Lyft diversifying into B2B delivery could improve utilization of drivers and generate incremental revenue, the report added. Longer work from home restrictions could play down on the firm.
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