Goldman’s top technology analyst is laying out his best internet picks as the first-quarter earnings season wraps up. Despite a murky macro backdrop, “our main takeaway from this earnings season was that the Internet consumer is continuing a theme from 2023 into 1H 2024 of settling into a normalized behavior with consumer spending growing YoY albeit with a continued shift toward services over goods,” wrote Eric Sheridan. Given this setup, many investors opt for “scaled players with a proven track record,” as well as those that can continue growing revenue and maintaining operating margins while returning capital. Here are some of the firm’s favorite names: Sheridan named Amazon as a top pick. The stock, up 21% year to date, offers one of best risk-reward opportunities coming out of the season, he said, citing a recovery in Amazon Web Service revenue. The company is also experiencing strong e-commerce revenue and operating margins in its North American business. He added that Alphabet should benefit from signs of strong advertising demand as it recovers from overblown concerns regarding long-term search. Sheridan also expects Meta Platforms to benefit from similar ad trends and its AI potential. GOOGL YTD mountain Shares this year “[Meta’s] Q1 earnings report signaled a vocal commitment to AI and metaverse investment cycles with short-term revenue trajectory less a focus when compared to long-term potential of positioning the company for success across AI led platform/product shifts,” he wrote. Beyond the megacap names, Sheridan highlighted Expedia as a stock that should benefit from the normalization of online travel toward pre-Covid levels. He also views artificial intelligence as a potential tool that can reshape the industry and customer conversion. The firm’s price target suggests shares can rally nearly 60% following a 26% slump year to date. EXPE YTD mountain Shares this year Instacart is another internet stock poised to benefit in this changing consumer landscape, including consolidation toward fewer online services and platforms, according to Sheridan. Shares have surged 39% this year. “CART is taking a different approach in evolving towards a multi-vertical platform and announced a partnership with UBER in May to bring UBER’s restaurant delivery on CART’s platform, effectively marking its entrance in the restaurant category in addition to its core grocery business,” he added.
