Analyst Colin Sebastian of Robert W. Baird recently commented on the technology trends and provided his top technology picks for 2016. His top picks for the new year include Facebook Inc (NASDAQ:FB), Alphabet Inc (NASDAQ:GOOGL), and Amazon.com, Inc. (NASDAQ:AMZN), giving them all an Outperform rating without a price target. Sebastian has a 73% success rate recommending stocks with an average return of 20% per rating when measured over a one year horizon.
The analyst highlights several trends that he believes will dominate 2016, the first of which is online video substituting traditional TV ads. Sebastian credits this switch to “faster broadband, cheaper data plans, and fast-changing viewing habits.” According to the analyst, online video provides advertisers a better way to target their customers, and he sees a $10 billion market opportunity in the U.S. for 2016, marking 30% y/y growth. The analyst states that the companies that will benefit most from this are Google and Facebook, and he is particularly upbeat on Facebook’s “Instagram/Messenger/WhatsApp monetization.”
Another key trend going into 2016 is machine learning, which help develop technologies such as voice recognition and product recommendations. He notes “a significant ramp in public discussion” related to this field among management teams of major companies. He continues, “We believe that 2016 may be the year in which machine learning finally reaches ‘mainstream’ status” and points to Google, Facebook, and Amazon as industry leaders. Related to this trend is the rise of hyper connected homes, with Google’s Nest, Amazon’s Echo and Apple TV offering “home automation” services through voice recognition and compliment the Internet of Things (IoT) trend.
The analyst is particularly optimistic regarding the switch to the cloud. He believes that the cloud “will continue to disrupt traditional enterprise technology,” as more enterprise-level firms will switch over because “existing capital investments in servers and data centers are fully amortized.” Sebastian states that switching to the cloud not only cuts costs for data storage, saving $3-4 for every $1 spent on cloud, but also requires less personnel. According to the analyst, key players in this field are Amazon, through AWS, and Google.
Other trends the analysts’ comments on are the release of 5G; growth of Amazon’s logistics, crediting recent reports of “air cargo and trucking operations” and self-driving cars going into 2016, marking a deal with Google and Ford; and the rise of virtual reality for Facebook’s Oculus Rift.
According to TipRanks’ statistics, out of the 34 analysts who have rated Facebook in the last 3 months, 33 are bullish while one remains on the sidelines. The average 12-month price target for the stock is $125.33, marking a 20% upside from where shares closed.
Out of the 34 analysts polled by TipRanks who have rated Google in the last 3 months, 33 gave a Buy rating while one remains on the sidelines. The average 12-month price target for the stock is $856.30, marking a 10% upside from where shares last closed.
According to TipRanks’ statistics, out of the 30 analysts who have rated Amazon in the last 3 months, 26 are bullish while 4 remain on the sidelines. The average 12-month price target for the stock is $751.93, marking an 11% upside from where shares closed.