Uncertainty and volatility in China’s stock market has reverberated throughout the world, sending investors to the sidelines. However, Cantor Fitzgerald analyst Youssef Squali is remaining optimistic throughout the pullback, highlighting his four top stocks to buy amid the sell-off: Alibaba Group Holding Ltd (NYSE:BABA), Amazon.com, Inc. (NASDAQ:AMZN), Facebook Inc (NASDAQ:FB), and Google Inc (NASDAQ:GOOGL).
Squali explains, “Recent market volatility has led to a sharp pullback in Internet stocks, and while we won’t attempt to call the bottom, we would be buyers of leaders with outsized growth opportunities and huge competitive moat.” All of these stocks are dominant in their respective markets and are growing faster than their peers.
Youssef Squali has a 54% success rate recommending stocks with a +13.6% average return per rating when measured over one-year and no benchmark.
Alibaba Group Holding Ltd
The analyst has a Buy rating on Alibaba with a $110 price target. Recent turmoil in the Chinese market has not changed Squali’s bullish view on the stock because “Alibaba is China’s dominant ecommerce player, and… this segment [is] far from maturing (growing middle class, inadequate retail infrastructure, strong cross border opportunity, etc.).” He explains, “Recent market turmoil appears to have had little impact on retail spending, which grew 10.5% Y/Y in July vs. 10.6% in June.”
Youssef Squali has rated Alibaba 9 times since September 2014, earning a 0% success rate recommending the stock as it is dropping due to the Chinese selloff. Out of the 16 analysts polled by TipRanks in the last 3 months, 14 are bullish on BABA and 2 are neutral. The average 12-month price target is $95.87, marking a 40% potential upside from current levels.
The analyst has a Buy rating on Amazon with a $670 price target. Squali explains, “With a market share of 1.5% in China (iResearch, 2014), Amazon’s Chinese exposure is limited, but the company remains in investment mode, which means that a devaluation in the RMB should actually be positive to margins short-term.” He sees an attractive risk/reward ratio because he believes the company’s AWS will continue to perform well.
Youssef Squali has rated Amazon 19 times since October 2009, earning a 79% success rate recommending the stock with a +26.4% average return per rating. According to TipRanks, 29 analysts are bullish on Amazon and 3 are neutral. The average 12-month price target on the stock is $623.40, marking a 34% potential upside from current levels.
Youssef Squali has a Buy rating on Facebook with a $105 price target. He explains, “Facebook has no revenue exposure to China but faces the risk of a global economic slowdown, which would depress ad demand.” However, the company is still in an “early stage of growth and stands to benefit the most from the secular shift of traditional ad dollars to digital.” Squali concludes, “Facebook is the largest/most-engaged Internet platform with multiple drivers (improved ad targeting, auto-play video ads, monetization of Instagram, etc.) to fuel growth well in excess of the market.”
Squali has rated Facebook 30 times since September 2012, earning an 83% success rate recommending the stock with a +43.8% average return per FB rating. According to the 39 analysts polled by TipRanks in the last 3 months, 36 are bullish on Facebook, 2 are neutral, and 1 is bearish. The average 12-month price target on the stock is $110.83, marking a 29% potential upside from current levels.
Priceline Group Inc
Squali currently has a Buy rating on Priceline with a $1,480 price target. Because Priceline is the world’s largest online travel company, Squali explains that it is “exposed to a reduction in consumer discretionary spending as a result of economic weakness.” However, Squali qualifies, “The company does not have a direct exposure to China and caters to outbound Chinese travelers through a distribution partnership with CTRP. With no visible signs of weakening travel demand outside China, and current trends pointing to easing FX comps in 2H:15, we remain constructive.”
Squali has rated Priceline three times since September 2012, earning a 100% success rate recommending the company and a +22.9% average return per rating. TipRanks currently lists 7 analysts bullish on Priceline and 3 who are neutral. The 12-month average price target is $1,485.56, marking a 26% potential upside from current levels.
Squali currently has a Buy rating on Google with a $720 price target. The analyst noted, “While Google is exposed to the global economic slowdown, the company has virtually no direct exposure to China. Given its dominant share of Search (91% globally in July, StatCounter), and cash position (~$61B net cash/2Q:15), we see GOOG as relatively resilient.”
Squali has rated Google 35 times since March 2009, earning a 71% success rate recommending the stock with a +24.6% average return per rating. According to 32 analysts polled by TipRanks in the last 3 months, 29 are bullish on Google and 3 are neutral. The average 12-month price target on the stock is $769.03, marking a 25% potential upside from current levels.