The continuing growth of the internet, which recently celebrated its 30th birthday, is a story almost without parallel in the past 20 years. From the dial-up days on AOL and the Netscape browser to today’s ultra-fast connections via Wi-Fi and super-fast cable and optical connections, the face of commerce, business and almost everything that touches our daily lives has changed.
The Wall Street conference calendar is heating up, and Deutsche Bank just completed its annual DB Media Conference in Palm Beach. The firm hosted several of the top internet companies, and three have surged to the top as the favorite stock ideas. While better suited for aggressive accounts, all three should continue to carve out solid growth in their respective silos.
This is a top Deutsche Bank pick with solid upside to the target price. IAC/InterActiveCorp (NASDAQ: IAC) operates a diverse collection of online media assets, with Ask.com search and Match.com personals driving the bulk of its revenue and profits. IAC generates revenue from a combination of advertising (both search and display), subscriptions and transactions.
The 2017 merger between Angie’s List and IAC/ InterActiveCorp Home Adviser was well received, as the company was combined with HomeAdvisor, IAC’s home services marketplace. Wall Street analysts are very positive, as an attractive sum of the parts analysis reflects strong top and bottom line growth at both Angie’s List and Match.com, strong free cash flow generation in the Publishing and Applications segments, and prospects for upside from smaller businesses being currently incubated.
Deutsche Bank hosted IAC executives at the conference and came away with this from their remarks:
We hosted IAC CFO, Glenn Schiffman, at DB Media/Tech conference where the tone was upbeat. The discussion centered on (1) the company’s core competencies and track record, (2) the six growth engines and (3) exciting upcoming opportunities. IAC has an amazing track record of building companies and returning capital to shareholders as evident by the incubation and spinning off multiple companies over the last 24 years and giving shareholders a ~15% compounded annual growth rate versus the S&P (over the same time period) yielding ~9% CAGR.
The Deutsche Bank price target on the shares is $253, and the Wall Street consensus target is $237.82. The stock closed trading on Wednesday at $206.61.
This is also a solid buy for aggressive accounts as it still trades separately from IAC. ANGI Homeservices Inc.’s (NASDAQ: ANGI) Angie’s List connects consumers with local service providers, enabling consumers to research, hire, rate and review local professionals and buy local services.
Angie’s List originally focused on home service providers (such as plumbers, painters, electricians and handymen). It has more than 3 million paid members and more than 54,000 participating advertiser service providers on the site.
In February the company reported fourth-quarter net income of $36.7 million, after reporting a loss in the same period a year earlier. The provider of a digital marketplace for home services posted revenue of $279 million in the period, missing just slightly Wall Street forecasts.
Deutsche Bank has a $19 price target, while the consensus target is $20.93. Shares closed at $16.10 on Wednesday.
This is the top search engine in Russia, with almost 65% advertising and traffic share in paid search, and it continues posting solid growth. Similar to China’s Baidu, Yandex N.V. (NASDAQ: YNDX) is one of the few players globally that managed to successfully compete against Google in paid search.
The company is geared to structural growth in internet advertising as the Russian market sees higher internet penetration and higher share of ad budgets moving away from traditional media to new media. Many on Wall Street expect rapid growth of internet advertising and that Yandex will stay in the lead in paid search.
Yandex Taxi is a fast growing segment, and analysts expect it to carry out as many as 2.2 billion rides and achieve a 20% take-rate (net) across Russia by 2022. Assuming 35 million users, which is 24% of the population, that could translate into 64 rides per user by 2022, which compares to 53 64 rides per user for Uber globally in 2017. A stunning growth rate.
The $44 Deutsche Bank price target is higher than the $42.83 consensus target. The stock closed most recently at $35.72.
These top picks from Deutsche Bank actually give investors a chance to play on the huge internet growth in a smaller and perhaps more profitable way. All these stock should be only placed in aggressive growth accounts.