Despite Volatility, SunTrust Positive on Top Internet and Digital Media Stocks

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It was inevitable that sooner or later the huge run in the FANG stocks would be disrupted, and Facebook was the main culprit when it disappointed on almost every metric and the stock was absolutely crushed. Toss in the external issues such as privacy concerns, and many investors basically threw in the towel on the sector. The fact remains that social media and the internet will remain ubiquitous, and money will still be made.

A new research report from SunTrust notes that the second-quarter earnings reporting season was one of, if not the most volatile earnings season in recent memory, and while the need for some companies to right their proverbial ship is evident, there is still a huge opportunity.

Five companies remain as favorite large-cap play, and all are rated Buy at SunTrust.

Alibaba

This red-hot momentum play has continued to be among the most bought tech companies on Wall Street. Alibaba Group Holding Ltd. (NYSE: BABA) runs the largest retail marketplaces (Taobao, TMall) and leading B2B sites (Alibaba.com, 1688.com) in China and Lazada in Southeast Asia. It collects revenues mainly from commissions, marketing services, subscription fees, cloud computing and software, as well as other value-added services.

The company has gone beyond e-commerce and developed into a sophisticated new type of conglomerate in the cyber-era with e-commerce as the base for the rest of the four businesses: logistics, finance, data-computing and cross-border infrastructure. Top analysts expect a whopping 24% compounded annual growth rate between now and 2018 for e-commerce in China.

The SunTrust price target for the stock is $215, while the Wall Street consensus target price is $254.43. The stock closed most recently at $187.23 per share.

Alphabet

The technology giant continues to expand, and while search is still king, the cloud presence is growing fast. Alphabet Inc. (NASDAQ: GOOGL) is a global technology company focused on key areas, such as search, advertising, operating systems and platforms, enterprise and hardware products. It generates revenue primarily by delivering online advertising and by selling apps and contents on Google Play, as well as hardware products. The company provides its products and services in more than 100 languages and in 190 countries, regions and territories.

Alphabet offers performance and brand advertising services. It operates through Google and Other Bets segments. The Google segment includes principal internet products, such as Search, Ads, Commerce, Maps, YouTube, Apps, Cloud, Android, Chrome and Google Play, as well as technical infrastructure and newer efforts, such as virtual reality.

The company blew out earnings numbers, and with a wide and bountiful silo of products and services, the stock remains almost unchallenged. It should be noted that traffic acquisition cost relief drove 20% gross profit growth despite heavy cloud infrastructure and YouTube content investment.

SunTrust has a $1,370 price target for the shares, and the posted consensus target is $1,367.96. The stock closed Tuesday’s trading at $1,227.22.