As the first-quarter (Q1) 2024 earnings season approaches, JPMorgan analyst Doug Anmuth, CFA, remains bullish on the Internet sector, citing fundamental drivers and company-specific performance.
Despite some turbulence, the internet sector has seen a weighted average increase of 23% in stock performance year to date.
Anmuth's key players to watch include Amazon.com Inc
Amazon - Best Idea for 2024
Anmuth maintains Amazon as the top pick, calling it JPMorgan's "Best Idea for 2024". He emphasized its robust fundamentals and growth prospects.
He anticipates accelerated growth in Amazon Web Services (AWS) throughout 2024, fueled by easing optimizations, new workload deployments, and early monetization of General Artificial Intelligence (GenAI).
Additionally, strong growth in North America, improved international profitability, and disciplined cost management contribute to a multi-year Free Cash Flow (FCF) ramp. Investors are eyeing first-quarter net sales of $142B-$144B and AWS growth exceeding 15%, among other key metrics, indicating positive sentiment towards Amazon's performance.
Meta - Room For Upside Potential
Meta's solid first-quarter advertising checks and emergence as an AI leader in the ad sector bode well for the stock. Anmuth also shed light on the role of GenAI (General Artificial Intelligence) in investor discussions. While early benefits are primarily seen in coding efficiencies and cost savings, Meta stands out for its effective use of AI in enhancing its advertising capabilities.
Despite tougher year-over-year comparisons, Meta's revenue is expected to meet or exceed guidance, with a mid-teens growth projection for the year.
With Meta trading at a modest 21x 2025E GAAP EPS, Anmuth sees room for upside potential, especially considering its position relative to other major companies.
On Monday, April 15, Meta won the dismissal of some claims in a dozen lawsuits accusing its CEO Mark Zuckerberg of concealing from the public that Facebook and Instagram were harmful to children.
Uber - Promising Three-Year Outlook
Uber continues to be a favored pick, with its resilience in demand, profitability initiatives, and promising three-year outlook.
Although some key catalysts like GAAP profitability and S&P 500 inclusion have passed, Anmuth believes Uber's shares can still deliver through continued execution and earnings growth.
The company's shift towards absolute profit dollar growth rather than incremental margins aligns with its focus on profitability. Anmuth also sees upside potential in Uber's $7 billion buyback plan running through 2026.
In summary, JPMorgan's outlook for the Internet sector remains bullish, with Amazon, Meta, and Uber positioned as top picks. The integration of artificial intelligence, especially in Meta's case, underscores its potential to drive future growth.
However, cautious optimism is advised, considering potential challenges such as growth deceleration and high valuations in certain cases.
