Bernstein analysts weighed in on the outlook for the internet sector for this year, highlighting Uber (NYSE:UBER) as a quality compounder.
The research note highlights an increase in EBITDA estimates and a potential upside to Free Cash Flow (FCF) per share from buybacks.
However, given the stock's substantial 149% gain in 2023, inclusion in the S&P500, and elevated expectations, the next phase presents challenges.
Along these lines, analysts introduced DoorDash (NASDAQ:DASH) as a new Top Pick with the business improvement being seen as a "UBER 2.0" story.
This is due to improving EBITDA, enhanced earnings quality (anticipating positive GAAP EPS in 2H24), and potential to surpass consensus expectations on gross profit and profitability.
Despite DASH's doubling in 2023, it is noted to have become relatively cheaper throughout the year as EBITDA improved.
“While multiples aren’t overly stretched, we find ourselves being selective given varying fundamental outlooks across our space. We stick with our highest conviction names in DASH and UBER, now in that order. On the other hand, we’re tactically cautious on the set-up for our eCommerce basket (ETSY/EBAY),” the analysts said.