Wells Fargo initiated coverage on 13 large-cap Internet sector companies, including Meta Platforms Inc. (NASDAQ:META), Amazon (NASDAQ:AMZN), and Alphabet Inc. (NASDAQ:GOOGL).
Meta Platforms was initiated with an Equal Weight rating and a price target of $276. Wells Fargo expressed skepticism towards optimistic earnings estimates for 2024. The firm believes that near-term growth is likely limited due to substantial investments in AI/Metaverse and potential EU regulatory risks. It also forecasts higher capital expenditures for 2024 and anticipates increased pressure on Meta's free cash flow due to spending on servers and data centers.
Amazon was initiated with an Overweight rating and a $159 price target. Wells Fargo forecasts that North America Retail margins will recover to 2019 levels by 2025, a year earlier than market expectations. It anticipates a positive inflection in AWS growth beginning in August and ending the year with 15% growth. “We are tactically positive on the AWS business given 2H reacceleration potential, but see market share trend vs. Azure obscuring longer-term optimism,” said the firm, adding that it views Amazon as its top pick in the internet sector.
Alphabet was initiated with an Equal Weight rating and a $117 price target. Wells Fargo noted that the conversational search format transition brings significant uncertainty to the search market for the first time in over a decade. It anticipates pricing volatility and aggressive competition over Google’s search distribution partnerships, which could negatively impact medium-term search growth and profitability. “Even if Google maintains search leadership, we do not expect a replication of last decade’s prosperity for the company,” added the firm.