Late Tuesday, Citigroup (NYSE:C) analyst Ronald Josey initiated coverage on 6 stocks and assumed coverage on 15 stocks across the North American Internet sector, with their top picks being Amazon.com, Inc. (NASDAQ:AMZN), Snap Inc . (NYSE:SNAP), Airbnb, Inc. (ABNB), and DoorDash, Inc. (DASH).
The analyst sees multiple vectors ahead for sustained growth for the sector as consumer engagement online continues to be more immersive and grow, but also recognizes the heightened volatility over the past several quarters, given debates on what the new-normal looks like post-COVID, the longer-term impact of Apple’s ATT changes, greater regulatory scrutiny, and increasing macro fears.
The brokerage added Amazon.com to its NAM Focus List given the company’s leading position in eCommerce, Online Advertising and Cloud - the three of the largest secular trends across the Internet, as well as its view of improving operating efficiencies. While recognizing that higher operating costs will probably impact margins in the shorter term due to rising transportation costs, the brokerage believes the company should benefit from improved operational efficiencies at its new Fulfillment Centers, the closing of some of its physical retail locations, and the lapping of COVID-related labor shortages.
The analysts believe Snap is executing extremely well across its core product and monetization opportunities, emphasizing that the company's DAUs grew over 20% for 5 straight quarters and its Advanced Conversion tools helped it recover (still recovering) more quickly from Apple’s ATT changes relative to its social networking peers.
The brokerage believes Airbnb is defining the Alternative Accommodations market, and benefiting from a shift to longer-term stays given an increasingly flexible workforce. The brokerage thinks the company is well-positioned to benefit as global travel recovers in 2022 and beyond.
The analysts believe DoorDash is well-positioned to continue growing its share of the food delivery market in the U.S., while expanding to other services, like Quick Commerce and Drive.
By Davit Kirakosyan