Top Analyst Very Bullish on Large-Cap Internet Stocks as Digital Ad Growth Explodes

The Jefferies report noted this:

Alphabet has outperformed major indices year-to-date as investor sentiment turned positive. Our checks have been broadly positive, indicating accelerating momentum in the ad business and sustained strength in Cloud. We raise estimates and our price target. The company remains a top large cap pick as we believe it should benefit in 2021 from ad spend recovery, pent-up demand for Google Cloud, and call options on Waymo and other non-advertising initiatives.

Jefferies raised the price target for Alphabet stock to $2,700 from $2,400. The Wall Street consensus target is $2,383.26, and the shares closed on Thursday trading at $2,252.52 apiece.


The huge social media leader has been on a roll, and the analysts remain very positive. Facebook Inc. (NASDAQ: FB) is the largest social network, with over 2.3 billion monthly active users and over 1.6 billion daily active users. The company generates revenue from advertising and from payments, with over 95% of revenue from advertising. It generates close to 50% of revenues in the United States and Canada and is expanding rapidly in international markets.

The company’s solutions also include Instagram, a mobile application that enables people to take photos or videos, customize them with filter effects, and share them with friends and followers in a photo feed or send them directly to friends. Messenger, a messaging application for mobile and web on various platforms and devices, enables people to reach others instantly, as well as enable businesses to engage with customers. WhatsApp Messenger is a mobile messaging application.

The company has been under intense scrutiny lately, along with other big-tech giants. Some people allege there has been unreasonable censorship, and it is yet another that may be targeted by either Congress or the Department of Justice, or perhaps both. With that noted, it remains one of the largest and most powerful social media platforms in the world. Jefferies said this:

We believe street estimates of +34% year-over-year revenue growth are too conservative given 1) our checks point to first quarter social ad spend ahead of original plans, 2) the iOS 14 privacy change has not yet been implemented, 3) DR ad spend has remained robust, and 4) stimulus checks and COVID-19 optimism have driven a resurgence in brand spend. We also note that the street’s first quarter revenue estimates unjustifiably represent the largest quarter-over-quarter decline in the company’s ad revenue in public company history (excluding the first quarter 2020 COVID slowdown). In addition to a better-than-expected Q1, we also anticipate positive commentary around eComm initiatives (e.g. the number of users or businesses using Shops) and a lowering of the fiscal year 2021 expense guide to support the stock.

The $350 Jefferies price target was raised to $360, while the consensus target is $339.05. Thursday’s closing share price for Facebook stock was $296.52 a share.