On Friday, Piper Sandler, a financial services firm, reaffirmed its top stock picks for the year 2025, highlighting Alphabet (NASDAQ:GOOGL) Inc.'s GOOGL, Zillow Group Inc (NASDAQ:ZG).'s ZG, and Vimeo (NASDAQ:VMEO) Inc.'s VMEO across various market capitalization categories. With a market capitalization of $2.33 trillion and impressive revenue growth of 14.38%, Alphabet stands as a prominent player in the Interactive Media & Services industry.
The firm's analyst Thomas Champion provided insights on several themes and potential surprises that could shape the market in the upcoming years.According to InvestingPro, Alphabet demonstrates strong financial health with an Altman Z-Score of 14.83, indicating robust financial stability. Subscribers can access 12 additional ProTips and comprehensive financial analysis through the Pro Research Report.
Champion expects solid growth in the advertising market for 2025, although there may be fluctuations due to the timing of Easter, the Olympics, and political events. He mentioned that ad spending growth might slow in the first quarter of 2025, following a "Trump bump" that possibly boosted ad spend in late 2024. Regarding Uber Technologies Inc . (NYSE:UBER), the firm speculates on merger and acquisition opportunities that could alter the company's narrative, such as partnering with an autonomous vehicle company or expanding further into delivery services.
The anticipated launch of Project Kuiper, Amazon.com Inc (NASDAQ:AMZN).'s satellite initiative, is set to begin in 2025 and is expected to disrupt the broadband market, providing Amazon with a new revenue stream and the potential to bundle services with its Prime membership. In the social media space, the fate of TikTok is anticipated to be decided in early 2025, with advertisers considering a ban unlikely, despite betting markets suggesting a roughly 40% chance of such an outcome.
Piper Sandler also foresees the possibility of Reddit (NYSE:RDDT) enhancing its search functionality in 2025, which could improve user experience and drive platform growth. The firm points out that Meta Platforms Inc (NASDAQ:META).'s capital expenditures could be the highest among mega-cap companies in 2025, potentially leading to lower free cash flow for the year. Despite previous bearishness on the travel sector, the firm now believes consumer prioritization of travel will continue, and it awaits visible signs of a slowdown.
In the realm of artificial intelligence, Meta Platforms has reported approximately 500 million monthly active users utilizing its AI, and Amazon's AI, Rufus, has assisted with holiday shopping. By the end of 2025, the firm expects more tasks to be performed on behalf of consumers by AI.
For the gaming platform Roblox Corporation, consistent usage and the potential for a strong year if current trends continue are noted.InvestingPro analysis reveals Alphabet's strong position in AI innovation is supported by solid fundamentals, with a return on equity of 32% and robust cash flows. Discover detailed AI industry trends and company comparisons with InvestingPro's advanced analytics tools.
The real estate market, affected by mortgage rates, is expected to see an uptrend in volume, with 2026 potentially setting up well if a major inflection doesn't occur in 2025.
As for Piper Sandler's top stock picks, GOOGL is chosen as the top large-cap pick due to its AI capabilities in advertising and cloud services, which the firm believes are not yet reflected in the stock price. Trading at a P/E ratio of 25.03, InvestingPro data suggests the stock is currently fairly valued based on its Fair Value model. ZG is selected as the top SMID-cap pick, driven by enhanced markets and underappreciated software tools and mortgage services.
VMEO is the firm's choice for top small-cap pick, with significant re-engineering of its cost structure and a promising outlook for enterprise bookings and valuation.Access comprehensive valuation metrics, financial health scores, and expert analysis for over 1,400 US stocks through InvestingPro's Research Reports.
In other recent news, Alphabet Inc. faced a downgrade from JMP Securities amid potential anti-trust penalties that may significantly affect the company's distribution of search and search revenue in the United States. Alphabet also faces a $75 million antitrust fine by Turkey's antitrust authority for allegedly engaging in anti-competitive practices. Yet, despite these challenges, RBC Capital has raised Alphabet's share target due to its leadership in AI and growth potential.
In recent developments, Alphabet is planning to introduce an AI Mode to its search engine, potentially increasing the user base of its Gemini AI chatbot. However, the company could face potential restrictions from the Department of Justice due to its status as an illegal monopoly.
Meanwhile, Apple (NASDAQ:AAPL) has expressed interest in participating in Google's forthcoming U.S. antitrust trial concerning online search. The company wishes to protect revenue-sharing contracts with Google, which reportedly brought in an estimated $20 billion in 2022.
Lastly, Alphabet is preparing for new regulations from the U.S. that would designate it as a global gatekeeper for the distribution of AI chips. This could impact the company's overseas cloud services.
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