Last year the so-called FANG stocks were the rage of the market with the companies making up the group rising 50% on average. However, 2016 has been quite a different story, and while things are decidedly better now that we are in May, they are not close to matching last year’s heady upside. One thing is for sure, the internet demand trends are remaining very consistent, and the top companies will continue to thrive.
A new RBC research report makes the case that things continue to be strong in the sector, and some of the firm’s favorite stocks are now on sale. Three large cap stocks are top picks and they look solid for aggressive accounts that have capital and can tolerate a degree of volatility.
The technology giant is one of the top large cap picks at RBC. Alphabet Inc. (NASDAQ: GOOGL), through its subsidiaries, builds technology products and provides services to organize the information. The company offers Google Search, which provides information online, and Google Now, which offers information to users when they need it.
It also provides YouTube, which offers video, interactive and other ad formats. Android is an open source mobile software platform. Its hardware products include Chromebook, Chrome OS devices, Chromecast and Nexus devices. Google Play is a cloud-based digital entertainment store for apps, music, books and movies, while Google Drive is a place for users to create, share, collaborate and keep their stuff. Google Wallet is a virtual wallet for in-store contactless payments.
Top Wall Street analysts cite the company’s growing presence in the cloud, which some ultimately feel can be a $7 billion revenue opportunity by 2020. The current cloud products offered by the company are improving, and the analysts cite five potential strengths and key potential adoption drivers for the company. With the company targeting a total addressable market of $120 billion by 2020, the analysts feel revenue can jump from $1 billion last year to $7 billion by then.
The company reported results for the quarter that were below expectations, but overall most analysts called it a “good quarter.” Despite missing expectations the results overall were still solid with 23% or so currency and hedging neutral (FXHN) revenue and non-GAAP operating income growing 21% year over year on 1% margin expansion. RBC notes that Core Google is generating consistent revenue growth/acceleration and margin stabilization and expansion. Toss in a solid stock buyback and a very cheap valuation, and the stock is compelling.
The RBC price target is a massive $1,000, and the Thomson/First Call consensus price target is posted at $910.86. Shares closed Monday at $730.30.