Analysts at RBC Capital Markets on Friday initiated coverage on five top tech stocks. While one might ask what took them so long, the wait might have been worth it. Three of these stocks sport market caps near or above $1 trillion, so even modest growth can be meaningful.
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Amazon
Take Amazon.com Inc. (NASDAQ: AMZN), for instance. RBC initiated coverage on the stock Friday morning with an Outperform rating and a price target of $4,150. The analysts also added Amazon to its list of the top 30 global ideas, the firm’s list of high-conviction investments.
Over the past 12 months, Amazon stock has added a meager 4.3% to its share price, and it traded early Friday morning at around $3,286.60. At that price, the upside potential to RBC’s price target is more than 26%. The firm’s target is essentially equal to the consensus price target and not that far away from the high target of $5,000.
Citing Amazon’s enormous scale, vertical integration in e-commerce, and its industry-leading cloud business, RBC sees Amazon as having “many shots on goal for future growth opportunities in new verticals.” The analysts are particularly impressed with Amazon’s booming ad business, calling it “a massive opportunity to drive accretive growth.” And RBC is not especially worried about regulatory risk, seeing the risk as “relatively low” compared to the long-term value Amazon offers.
The stock’s 52-week trading range is $2,881.00 to $3,773.08, and Amazon’s market cap is $1.66 trillion. The company does not pay a dividend.
Coverage of social media giant Facebook Inc. (NASDAQ: FB) also was initiated with an Outperform rating. RBC’s price target of $425 is just 1.8% higher than the consensus, but the upside potential based on a current price of around $341.30 is 32.4%. The high price target on Facebook stock is $500.
RBC acknowledges Facebook’s “unmatched knowledge of the world’s consumers” but thinks that future growth is tied to Facebook’s ability to “deepen its relationship with its nearly 3 billion users.” The analysts think that the company is well-positioned to transform itself from a “social-centric platform to a fuller source of online utility.” RBC sees little impact from Apple’s recent change requiring companies to choose what personal information users are willing to share with app developers.
Facebook stock traded up less than 1% Friday morning, in a 52-week range of $244.61 to $384.33. The company’s market cap is $962.56 billion, and Facebook does not pay a dividend.
Alphabet
Alphabet Inc. (NASDAQ: GOOGL) is the third trillion-dollar company initiated at RBC Friday morning. Analysts placed an initial rating of Outperform on the stock with a price target of $3,400. That’s about 7.4% higher than the consensus target and implies an upside potential of 26.3% based on a current price of $2,691.20. The high price target on the stock is $4,288.52.
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While acknowledging Alphabet’s higher regulatory risk, RBC’s analysts defend their rating based on two points: “1) GOOGL’s ability to perpetually custom-tailor its downfunnel strategy by vertical for maximum equity value creation, and 2) bullish checks on core search’s l-t [long-term] pricing power alongside clear YouTube share gains.”
Alphabet stock traded up by about 1% Friday morning, in a 52-week range of $1,433.23 to $2,925.08. The company’s market cap is nearly $1.8 trillion, and Alphabet does not pay a dividend.
Snap
RBC initiated coverage of self-styled camera company Snap Inc. (NYSE: SNAP) with an Outperform rating and a price target of $88, about 2.3% above the consensus target. The potential upside based on a current trading price of around $73.60 is about 19.6%. The high target on Snap stock is $110.
Snap has everything pointed in the right direction to become a top social media business, according to RBC’s analysts: “stable footing in an attractive secularly growing ad market, an evolving direct response/ad-load/downfunnel commerce narrative leading to potential ARPU [average revenue per user] and profitability upside and finally, new products that could invite broader usage and incremental monetization.”
Channel checks were more mixed, but the analysts think the possibility of adverse near- or medium-term effects “seems low” compared to the stage of the company’s developing monetization.
Snap’s 52-week price range is $26.13 to $83.34, and the stock traded down by less than 1% early Friday morning. The company’s market cap is $116.5 billion, and it does not pay a dividend.
Of the five companies on which RBC started coverage this morning, Pinterest Inc. (NYSE: PINS) is the only one to receive a Sector Perform rating. RBC analysts set a price target of $58 on the stock, well below the consensus target of $71.75. At a current price of $52.80, the upside potential to RBC’s target is nearly 9%. The high target on the stock is $100.
While the analysts think Pinterest is being “prudent” by ramping its monetization through a growing ad platform, they also believe that “user growth is likely closer to plateauing than not and our channel feedback indicated that outside of targeted categories, conversion needs improvement, particularly vs. [Facebook] where we think user crossover is virtually 100%.” Before lifting its rating and price target on Pinterest, RBC wants to see “an improving content or commerce experience.”
Pinterest’s market cap is $33.97 billion, and the stock’s 52-week range is $42.32 to $89.90. The company does not pay a dividend.
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