One of the biggest stories for the past few years has been the incredible market leadership of the mega-cap technology stocks. Last week some of the biggest players posted massive earnings, and as usual shares exploded higher. The conundrum for investors is this: with many of these top companies trading at bloated multiples, is there enough upside remaining from current levels?
One outstanding place to look now may be at the small and mid-cap leaders in the internet and digital media arena. While they too have performed nicely, they are offering growth investors with more risk tolerance some outstanding upside potential for the rest of 2020 and beyond.
The analysts at Truist Securities, which was formed by the merger of SunTrust Robinson Humphrey and BB&T Capital Markets, are out with an update on the arena and the firm’s top stock picks there. We selected five of the small and mid-cap top picks, and all are rated Buy. It’s important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.
This company is probably the most well known for constructing websites. GoDaddy Inc. (NYSE: GDDY) is a technology provider to small businesses, web design professionals and individuals. It delivers cloud-based products and personalized customer care. The company operates a domain marketplace, where its customers can find the digital real estate that matches their idea. It provides website building, hosting and security tools to help customers construct and protect their online presence.
GoDaddy provides applications that enable connecting to customers and managing businesses. It also provides search, discovery and recommendation tools, as well as a selection of domain name for ventures. It provides productivity tools, such as domain-specific email, online storage, invoicing, bookkeeping and payment solutions to run ventures, as well as marketing products.
The company proved again that it can deliver consistent execution in any weather as first-quarter results were strong. Analysts feel that the company can be a low teens revenue grower, with steady free cash flow margin improvement, plus a $500 million reloaded share buyback program after $1 billion purchased over the past year. GoDaddy has new product offerings, including a new freemium option.
The Truist Securities price target for the shares is $88, and the Wall Street consensus target is $89.46. GoDaddy stock closed Tuesday at $73.23 a share, after a 4.3% gain on the day.
This is a top internet pick at Truist Securities with solid upside to the target price. IAC/InterActiveCorp (NASDAQ: IAC) operates as a media and internet company worldwide.
Its various platforms include Ask.com, which empowers people to find, learn and explore answers from any device or location. Bluecrew is an on-demand platform for flexible W-2 work job seekers for sustainable and reliable employment that fits their schedules across a range of industries, including warehousing, logistics, e-commerce, events, delivery and hospitality. Care.com is a leading platform for finding and managing family care, and Dotdash helps people to find answers and solve problems.
The company also operates Newco, a platform for entrepreneurs to build a business, and NurseFly, a marketplace for health care staffing that empowers nurses and health care professionals by giving them access to transparent and accurate information to aid in their job search.
IAC also owns The Daily Beast, which provides opinion and independent takes on politics, world news, pop culture and entertainment. And it owns Vimeo, a professional video platform and community, and a marketplace for home services.
Truist Securities has a $135 price objective, but the consensus target price is much higher at $157.14. Tuesday’s closing price for IAC stock was $133.85.
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