Wolfe Names Growth Favorites in E-Commerce and Communications (NASDAQ:AMZN)

Wolfe Research has launched an analysis of 22 large and small/midsize internet companies, highlighting several that stand to grow with generative AI (GenAI) and others that will lag the sector due to competitive pressures and headwinds in macroeconomic conditions.

Wolfe’s rates The e-commerce subsector with a Market Weight rating for discretionary spending will continue to be under pressure, with stretched consumers shifting spending toward services and experiences and away from physical goods.

In this group Amazon (NASDAQ:AMZN) is Wolfe’s top pick with an Outperform rating as the company expects to expand retail margins and gain e-commerce market share thanks to faster deliveries and a shift toward essentials. However, the company is Neutral on eBay (NASDAQ:EBAY), Etsy (NASDAQ:ETSY) and Chewy (CHWY), rating them as comparable in terms of performance, with consumer discretionary remaining a counterweight to stocks in this category.

Internet advertising, which includes names such as Google (GOOG), Meta (NASDAQ:META) and Pinterest (NYSE:PINS) gets an overall Overweight rating as product-driven catalysts are aided by secular tailwinds and the political cycle. Wolfe assigns an Outperform rating to Google (GOOG) and Meta (META) as GenAI will drive user engagement and market share in cloud computing capabilities. Pinterest (PINS), Snap (SNAP) and Yelp (YELP) have Peer Perform ratings as changing ad budgets and infrastructure spending will limit share gains.

Mobility and Delivery is rated Overweight by Wolfe, with healthy growth rates attributed to resilient spending and margin expansion. DoorDash (NASDAQ:DASH) and Uber (NYSE:UBER) are Wolfe’s top picks in this subsector as a competitive moat, product initiatives and rising profitability will continue to protect DASH and UBER from any potential consumer downturn.

In the Subscription subsector, rated overall as Market Weight, Wolfe advances Match (NASDAQ:MTCH) and Bumble (BMBL) with “Outperform” ratings, attributing bullish ratings to both payer growth and market expansion, particularly for Match (MTCH), whose Hinge platform is contributing to Match’s overall earnings amid its expanding global presence.

In addition to the initiation, Wolfe also identified seven key themes that will be important in 2024 and 2025, including GenAI, product development, regulation, sector maturity, profitability, capital allocation, cloud computing, and rising secular trends. Industry data cited by Wolfe indicates that total infrastructure spending on AI technologies could reach ~$190 billion by 2030, representing a 29% CAGR from estimated 2024 levels.

Among the remaining names not included in the report, Wolfe gave the following “Outperform” ratings: Magnite (MGNI), PubMatic (PUBM), Shopify (SHOP) and The Trade Desk (TTD).

Neutral Peer Perform ratings were given to Maplebear/Instacart (CART), Duolingo (DUOL), Lyft (LYFT), Peloton (PTON), and Roblox (RBLX).