Top analyst Youssef Squali at SunTrust is out betting on three heavyweights of the internet-verse: Alibaba Group Holding Ltd (NYSE:BABA), Amazon.com, Inc. (NASDAQ:AMZN), and Facebook Inc (NASDAQ:FB). From Alibaba’s monetization prospects of a booming mammoth online population in China; to Amazon’s worldwide marketplace “multi-pillar” savvy approach biting into multi-billion revenue odds; to Facebook’s innovative twists scoring big in user engagement and ad dollars alike- the top analyst believes these are the three stocks that should captivate investor interest for the long run.
Youssef Squali has a very good TipRanks score with a 73% success rate and a high ranking of #27 out of 4,627 analysts. Squali realizes 19.6% in his yearly returns. When suggesting BABA, Squali yields 31.8%. When rating AMZN, Squali garners 41.7%. When recommending FB, Squali gains 40.1% in average profits on the stock.
Let’s take a closer look:
Alibaba’s Got the Winning Edge
Alibaba a.k.a. the “one-stop-shop Asia play” on all things commerce, advertising, as well as cloud has Squali finding this platform has an unparalleled foothold in the biggest internet market pool- and will be one to watch as online users in China rise in better economies.
Considering China already tops the internet expanse with a whopping 721 million users that skyrocketed about 40% from 513 million just six years prior, it is even more encouraging how much room there is left for more growth. Penetration is merely a little over half the population in China, juxtaposed against over 80% in economies that are more developed, which Squali believes paves way for exciting prospects for BABA.
Therefore, the analyst initiates coverage on the stock with a Buy rating and a $175 price target, which represents a close to 10% increase from current levels.
“With its large and growing platform of active buyers, growing media assets, millions of merchants and a rapidly growing Cloud business, Alibaba offers a unique play on China and neighboring countries, spanning commerce, advertising, media consumption and the Cloud. […] BABA leverages Alipay for the majority of payments, and a proprietary logistics network for on-time delivery, removing key friction points for users to shop online,” comments the analyst.
Squali surmises that Alibaba’s branding, model, and scale are unstoppable and tower as superior, underscoring, “We believe that a differentiated commerce model, strong brand, unmatched scale in the world’s largest Internet market and proven management give Alibaba a unique advantage relative to peers. With accelerating top line growth, 500M+ mobile users, $500B+ in GMV (TTM), industry-leading EBITDA margin, and a rapidly growing Cloud business, BABA offers investors one of the best plays on growth of the middle class in and around China, and of the digital economy at large.”
TipRanks analytics showcase BABA as a Strong Buy. Based on 15 analysts polled by TipRanks in the last 3 months, all 15 rate a Buy on Alibaba stock. The 12-month average price target stands at $168.07, marking a 5% upside from where the stock is currently trading.
Amazon Not Cheap- But Compelling, and Sustainably a Commerce King
Amazon is not the stock to buy for being a bargain-basement deal- but for Squali, the real buy boils down the fact that this “king of commerce” is a success narrative ready to unravel over a “multi-decade” thanks to a strategy bolstered by various strong beams.
This king is a chameleon at acclimating to the turns of ecommerce trends, becoming quite the “trendsetter.” Yet, Squali praises Amazon “first and foremost” for its tech strengths, even as it is a disrupter of a $10 trillion retail industry.
As the company puts the pedal to the medal, establishing itself as a key player in groceries now with its forthcoming purchase of Whole Foods and well beyond, the analyst initiates coverage on shares of AMZN with a Buy rating and a $1,220 price target, which implies a roughly 24% increase from where the stock is currently trading.
Squali highlights, “Amazon’s strategy has evolved with the Internet, having morphed into a global marketplace that’s virtually all-encompassing, fueled by Prime, supported by a sophisticated logistics network and backed by AWS, all of which strengthen its competitive moat. Today, all three capabilities are massive businesses in their own right. The scale of the platform also provide Amazon with a wealth of consumer data, which it has yet to leverage effectively to help third parties target this significant user base; and in doing so, tap into another multi-billion revenue opportunity.”
Cheapest is not the crucial detail necessarily in the stock-verse, and Squali is placing his chips confidently behind this “fundamentally compelling” pick, concluding, “We find management’s maniacal focus on the customer and its leveraging of technology innovation to disrupt commerce, entertainment and IT services, to be sustainable competitive advantages. We think such a focus should enable AMZN to grow faster than peers, gain share in several segments of the economy and sustain above-peer valuation multiples for some time.”
TipRanks analytics reveal AMZN as a Strong Buy. Out of 33 analysts polled by TipRanks in the last 3 months, 31 are bullish on Amazon stock while 2 remain sidelined. With a return potential of 19%, the stock’s consensus target price stands at $1,174.68.
Facebook: A “Treasure Trove” of Valuable User Data- and Advertisers Know It
When it comes to the social web, CEO Mark Zuckerberg’s brainchild Facebook reigns as the true king- at least in the eyes of Squali, who believes this social media giant has what it takes to outpace the rest and defend its champion spot on the leaderboard for the long-term.
As such, the analyst initiates coverage on FB with a Buy rating and a price target of $210, which implies a 23% increase from where the stock is currently trading.
Squali cheers, “Facebook is the owner of some of the largest/most engaging platforms in the world, namely Facebook, WhatsApp, Messenger, and Instagram, three of which have 1B+ MAUs. This global reach has connected ~70% of all internet users WW, and is still growing. We believe this scale provides FB with a defensible position that is hard to replicate as scaled networks become harder to build.”
Additionally, thanks to its sense of authentic identity, the platform makes itself compelling from a personalization and engagement standpoint to users as well as to advertisers who find the wealth of data “highly relevant,” “targeted,” and subsequently, “more compelling.”
Meanwhile, the analyst sees a course steadfast to stellar revenue and profit growth, projecting a compound annual growth rate (CAGR) of roughly 25% between now and 2022- especially thanks to 5 million plus advertisers for Facebook and Facebook-acquired Instagram’s 1 million plus advertisers keeping strong growth roaring nicely along.
“Our rating is predicated on the company’s ability to continue to outgrow the competition and generate disproportionately higher profits through innovation in product, user growth and monetization, and astute acquisitions. Engagement, reach, and network effects continue to increase the platform’s value to advertisers, aided by macro tailwinds, including the shift to mobile, focus on video, and, importantly, improving measurability, viewability, and attribution metrics,” contends the analyst.
TipRanks analytics indicate FB as a Strong Buy. Out of 34 analysts polled by TipRanks in the last 3 months, 30 are bullish on Facebook stock, 2 remain sidelined, and 2 are bearish on the stock. With a return potential of nearly 13%, the stock’s consensus target price stands at $192.79.