GBH Insights analyst Daniel Ives is out delivering “very bullish” thoughts on high performing technology, or “FANG” stocks approaching the new year, even as he highlights prospective risks swirling in the analyst’s “crystal ball.” While positive on solid secular trends for the likes of tech leaders Facebook Inc (NASDAQ:FB) and Amazon.com, Inc. (NASDAQ:AMZN), as 2017 gets closer to turning to 2018, Amazon is the tech giant that merits a price target lift from Ives’ stance.
Let’s dive into these compelling FANG stories that have this analyst making two upbeat cases to buy Facebook and Amazon shares ahead of 2018:
Facebook’s “Golden Jewel” in Instagram Primed to Play Out Well Next Year
Facebook may still be evolving as far as its ad growth model and monetization strategy are concerned, but Ives sings the praises of the social media titan’s superior execution in the field, from engagement to MAU gains to ad growth. Approaching the fourth quarter and looking into next year, the analyst is hitting the “like” button on all of Facebook’s key metrics based on his latest checks and surveys.
With 2 billion plus users under the company’s belt and “healthy MAU growth front and center,” the analyst spots stellar momentum ahead and reiterates a Highly Attractive rating on FB stock with a $210 price target, which represents a 17% increase from current levels.
Ives predicts, “Facebook will continue to grow its massive global installed base in our opinion while importantly monetizing users especially on the Instagram side of the house, which remains the ‘core 1-2 punch’ that underlies our bullish thesis on the name.”
Additionally, the analyst recognizes that Instagram could very well be undervalued by the Street, highlighting: “Instagram growth and monetization are the keys going forward. We note that Instagram already announced 800 million MAUs in September (vs. 700 million in April) as this platform remains a ‘golden jewel’ in Facebook’s platform in our opinion with healthy monetization and ad growth set to play out in 2018 based on our forecasts. With this platform on pace to be over 1 billion MAUs by 1H2018 based on our estimates, we view this an underappreciated asset by the Street that could be a major growth catalyst for Facebook over the next 12 to 18 months on the advertising front.”
While Wall Street may be concerned regarding “a stepped up investment profile for the coming year,” Ives bets on Facebook’s newer growth initiatives as a crucial element of the titan’s strategy that he anticipates will spin out throughout the next years. These initiatives are needed for Facebook to “expand its drivers around ad growth rates, AR, mobile platform expansion, video, consumer engagement, and Instagram/Messenger monetization into 2018 and beyond,” the analyst concludes, even as he acknowledges that “investment year” are the two furthest words “investors want to hear.”
TipRanks data pooled from the last 3 months proves this social media titan to be a tech darling of Wall Street. Based on analyst expectations, Facebook belongs to the bulls, with 29 out of 31 voices on the Street rating a Buy on the stock, 1 maintaining a Hold, and just 1 issuing a Sell. With a return potential of nearly 17%, the stock’s consensus target price stands at $208.76.
Amazon’s Best Gem is Prime Growth
Amazon was the real headlining act when it came to Cyber Monday, as far as Ives is concerned, who bets this tech leader is on track to capture up to half of all holiday sales for the year.
On back of rising confidence in the e-commerce king’s fundamental core growth drivers through next year, analyst maintains a Highly Attractive rating on AMZN stock while bumping up the price target from $1,270 to $1,375, which implies a nearly 19% increase from current levels.
In an arena of Walmart vs. Amazon, even though Walmart has battled as a worthy competitor, Ives believes the competition is note close here: “While Walmart has done a commendable job beefing up its e-commerce strategy through organic (partner push, inventory expansion, offline driving online sales) and acquisitive means (Jet.com), Amazon continues to have an ‘iron grip’ on the e-commerce market heading into 2018 despite a clear bullseye on its back from retailers around the world including Bentonville.”
When it comes to Amazon’s most promising assets, Ives gives the advantage to Prime membership gains above all. Giving kudos to CEO Jeff Bezos for creating a Prime membership empire hovering beyond 855 million and going “strong,” the analyst sees another 20% plus in spending coming this year. In other words, Amazon has a “likely beat” on its hands for the fourth quarter, and a meaningful one at that, all while racing on a more robust than anticipated growth stride for next year.
Ives continues, “Prime growth remains the key jewel for Amazon going forward as cross-selling around Whole Foods customers and putting up more walls/barriers around its growing Prime customer base is a major ingredient in Amazon’s ability to fend off competition. International growth on Prime will also be another catalyst that we expect to play out in 2018 and should help further drive better than expected e-commerce retail growth in the year ahead.”
Ultimately, the analyst is betting on “near-term pain or long-term gain” when it comes to the e-commerce king’s “unique window of opportunity to double down on its consumer and enterprise initiatives” approaching the new year, all while driving heavyweight gains and cash flow for years to come. To put it bluntly, the Amazon machine is a diversified global franchise that has Ives more bullish than ever on prospects ahead of 2018.
TipRanks indicates highly positive investor sentiment is backing this e-commerce king. When taking under account the ratings of 34 analysts polled in the last 3 months, 33 are bullish on Amazon stock and only 1 remains on the sidelines. With a return potential of 11%, the 12-month average price target stands at $1,290.13.