With the first quarter of the 2015 behind us, Mark Mahaney of RBC Captial was able to offer some insight into his favorite large-cap Internet stocks. Looking back at the first quarter, Mahaney noted that trends within the Internet sector remained consistent. The analyst divides the sector into stocks that garner revenue through advertising, retail, or travel. Mahaney noted that advertising and retail Internet stocks have remained consistent and stable, while demand for travel stocks are stable for the most part but have “marginally weaker” growth compared to years prior.
Mark Mahaney has reshuffled his list of top large-cap Internet stocks as follows:
1. Amazon.com (NASDAQ:AMZN), $500 price target. As Mahaney’s top pick, the analyst noted that Amazon’s “Media, EGM & AWS Segments all delivered top-line acceleration, thanks to Prime, great execution, market share gains, and easier comps.” The analyst believes these positive trends are sustainable. He continued, “Recent segment disclosure highlights a highly profitable AWS and a modestly profitable (tho improving) Retail segment.” Going forward, Mahaney expects to see a growing impact from the increased price of Prime, faster delivery options, and ongoing CPG traction.
Mark Mahaney has rated Amazon 33 times since April 2009, earning a +26.2% average return per AMZN rating.
2. Facebook Inc (NASDAQ:FB) $105 price target.
Mahaney voiced confidence in Facebook after noting that the social media website delivered a 55% year-over-year increase on advertising revenue growth “on by far its toughest comp quarter.” He continues to note that the stock’s “aggressive ’15 opex spend outlook has been tempered,” thus creating a “very positive setup for FB shares for the balance of the year.” Going forward, Mahaney is looking to the rollout of auto-play video advertisements, monetizing Instagram, and WhatsApp to drive revenue. Mahaney concludes that Facebook remains “the best play” in the mobile and video online advertising segments.
Mark Mahaney has rated Facebook 20 times since June 2012, earning a +47.7% average return per FB rating.
3. LinkedIn Corporation (NYSE:LNKD), $275 price target.
Although Mahaney labels LinkedIn as the “most dislocated of the Large Cap Net stocks” due to the correction off of Q1 EPS results, he sees a lot of potential in the professional social network. Going forward, Manahey sees positive trends in increasing Corporate Solutions Customer Adds; “the impact of a Talent Solutions price increase;” a price increase in Marketing Solutions due to the takeover of “auction dynamics;” and the “potential rise to materiality (10% of total revenue) of Sales Navigator.” Mahaney concludes that “LNKD still has one of the strongest growth profiles in the sector.”
Mark Mahaney has rated LinkedIn 13 times since February 2012, earning a +22.1% average return per rating.
4. Priceline.com Incorporated (NASDAQ:PCLN), $1,400 price target.
Mahaney continues to expect “easing comps for PCLN International Bookings in every single ’15 quarter,” with margin recovery in the second half of the year. He expects Priceline to “nicely outperform through balance of year,” barring any significant forex surprises. Mahaney’s long-term investment thesis remains “largely intact, with large new revenue opportunities with Vacation Rentals and China Outbound Travel.”
Mark Mahaney has rated Priceline.com (NASDAQ:PCLN) 16 times since September 2011, earning a +25% average return per PCLN rating.
5. Expedia Inc (NASDAQ:EXPE), $120 price target.
Mahaney calls Expedia a “story of consistently improved execution.” He notes that the stock appeals to an “unusually broad base of investors” because of its dividends and stock buyback assets. Expedia outpaced Priceline for the first time in years during Q1 in terms of Hotel Room Nights Sold. Going forward, Mahaney is looking to the finalization of the Orbitz deal to provide “significant synergies.”
Mark Mahaney has rated Expedia 14 times since March 2009, earning a +52.2% average return per EXPE rating.
Overall, Mark Mahaney has a 64% success rate recommending stocks with a +22.9% average return per rating.