Sometimes big analyst upgrades in stocks are overlooked on days when there are bad stock market moves. That was the case on Monday, January 28, 2019, when Credit Suisse issued analyst upgrades on Grubhub Inc. (NYSE: GRUB) and Wayfair Inc. (NYSE: W) and made other changes and updates in the firm’s internet coverage. Both Grubhub and Wayfair were raised to Outperform from Neutral on a day when the S&P 500 fell 21 points (0.8%) and the tech-heavy Nasdaq Composite fell by more than 79 points (1.1%).

Amazon.com Inc. (NASDAQ: AMZN) also was maintained as Outperform at Credit Suisse, but the firm gave what looked and felt like a serious haircut to the upside price targets. What should stand out was that Credit Suisse was among the more bullish of analysts with its price target and is still quite positive on the top e-tailer in the United States.

Credit Suisse favors the mega-caps in the near term. One is Alphabet Inc. (NASDAQ: GOOGL), as the firm anticipates better-than-expected advertising revenue and websites growth for 2019 and beyond. This is to be driven by new products gaining traction and as it remains the primary destination for traffic acquisition as merchants/operators look to increase investments. Analyst Stephen Ju even anticipates that 2019 will be a harvest year for Google as it shows free cash flow growth acceleration starting in the first quarter following a step-up in capital spending and investments.

Also worth noting is that Credit Suisse even set the stage for taking advantage of pullbacks on sell-offs by initiating or increasing positions on Booking Holdings Inc. (NASDAQ: BKNG) and Expedia Inc. (NASDAQ: EXPE).

Credit Suisse noted on the Grubhub deal that the company is making the final push to cover major population centers. Its price target was raised to $130 from $125 in the call. The firm revisited its key debate points following an extensive model recalibration. Issues covered were as follows:

• The firm’s organic revenue and expense growth
• Unit economics and margins for marketplace vs. delivery
• Upfront delivery ramp investments
• ROI and payback periods on ad spend
• And the long-term operating margin as newer markets mature.

Credit Suisse’s Stephen Ju was specific that his upgrade was not a stock call around the fourth quarter earnings that are coming soon. Ju actually expects Grubhub’s initial EBITDA guidance to be below Street and brace for potentially a negative investor reaction. The upgraded view is based on its increased comfort around returns on recent initiatives being accretive and opportunistic. Ju even said:

And we would use any potential pullback to either increase or initiate a position on GRUB shares.

Wayfair was raised to Outperform from Neutral and the target price was raised to $130 from $117 in the sector-changing call. After conducting industry checks in an attempt to assess Wayfair’s competitive positioning, Ju concluded that its lead is not insurmountable to the larger online operators (i.e.., Amazon). Wayfair remains strong and defensible in the near-to-medium term. Ju said of Wayfair:

As we have made substantial reductions to our FY19 profitability estimate – which is now materially below Street on an expectation of continued near term investments – the premise of our thesis is entirely predicated on the long-term growth and profitability trajectory that these investments will help drive. By recalibrating our model to explicitly untangle the historical standalone P&L for both the U.S. and International, introducing frameworks for evaluating unit economics, repeat order rates, and return on ad spend, and explicitly forecasting expenses by region and cohort, we come away with incremental comfort around the sustainability of Wayfair’s growth trajectory and long term margin profile.