One amazing thing about the Internet and the top companies involved is the growth potential always seems robust and the top players seem to be continually strengthening their hands. A new report from RBC details the firm’s top Internet picks for what should prove to be an interesting finish to a rather frustrating trading year.
With many of the top Internet and Internet-related companies trading at the high end of valuation ranges, the RBC analysts note that caution is needed. From a secular change in how media is viewed to the poaching of employees, there is a changing landscape, and it appears likely the strong will only get stronger.
Here are the top five RBC large-cap Internet stocks to buy for the rest of 2015. They are presented in the order RBC ranks them.
This absolute leader in online retail and a dominate player in cloud storage business just crushed earnings last week. Amazon.com Inc. (NASDAQ: AMZN) serves consumers through retail websites that primarily include merchandise and content purchased for resale from vendors and those offered by third-party sellers. In addition, the company serves developers and enterprises through Amazon Web Services (AWS), which provides compute, storage, database, analytics, applications and deployment services that enable virtually various businesses.
Despite currency headwinds of $1.4 billion, the company still had worldwide unit growth of 22% in the quarter. Plus, AWS revenues increased an astounding 81% to $1.8 billion, which was $400 million more than the analysts’ estimates. RBC called it a “hat-trick quarter,” with revenue, growth acceleration and margin expansion across all three segments.
The RBC price target for the stock is $650, the same as the Thomson/First Call consensus target. The stock closed Friday at $531.52.
This stock has been hit hard this year, possibly offering aggressive tech investors and outstanding entry point. It is also one of the best companies to work for. LinkedIn Corp. (NASDAQ: LNKD) continues to dominate the interconnecting of business professionals, with over 300 million members worldwide. But uneven earnings and some corporate missteps have turned the stock into a volatility victim. An improving economy and demand for highly skilled workers have provided the impetus for earnings surprises.
Wall Street analysts who met with the company recently indicated that the new Sales Navigator product launched last year is doing well. LinkedIn has ramped sales, selling the product to well over 200 at this point, with field sales having an increasingly rising impact, as field sales accounted for almost 50% of bookings in the second quarter and almost 50% of revenue. Last year most of SN revenue and bookings were generated on a self-serve basis.
The RBC team concedes the company is the most dislocated of the large cap net stocks, but numerous positives and one of the strongest growth profiles in the sector, driven in part by very significant EBITDA margin expansion, make it a solid add for the rest of this year and 2016. Most analysts are looking for further updates from the company at the Sales Connect conference in Las Vegas in October.
The RBC price target is $275, and the consensus target is $255.54. The stock closed Friday at $189.59.