Goldman Sachs Upgrades Internet Sector to Attractive (AMZN) (NFLX) (TWTR) (LNKD)
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Rating Summary:
7 Buy, 31 Hold, 3 Sell
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Today's Overall Ratings:
Up: 11 | Down: 11 | New: 43
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Goldman Sachs upgraded the Internet sector from Neutral to Attractive Tuesday, with the sector underperforming the S&P by 27% since the firm lowered their coverage view in December 2013.
Analyst Heath Terry said reasonable valuations, less demanding consensus expectations, and an outlook for more balanced equity supply/demand should lead to outperformance.
Terry notes that over the past 12 months, Internet 2015E EV/EBITDA multiples have contracted 4X, share prices have declined 16%, and EBITDA growth has decreased 100bp on average, bringing sector multiples back in line with the three-year average. Meanwhile, sector growth continues to offer 2X faster growth and higher returns than the market averages.
As noted earlier, the firm upgraded GrubHub (NYSE: GRUB) from Neutral to Buy, downgraded Shutterfly (NASDAQ: SFLY) from Buy to Neutral and removed The Priceline Group (NASDAQ: PCLN) from its Conviction Buy List. The firm believes 2015 will re-focus investors on profitable, faster-growing companies with organic margin expansion like Amazon (NASDAQ: AMZN), Criteo (NASDAQ: CRTO), GrubHub, Netflix (NASDAQ: NFLX), Pandora (NYSE: P), Twitter (NYSE: TWTR) and Zulily (NASDAQ: ZU), while they also believe the asset value at eBay (NASDAQ: EBAY) is compelling into the 2H15 separation with PayPal. The firm remains Sell rated on companies with fundamental challenges like IAC (NASDAQ: IACI) and Coupons.com (NYSE: COUP).
Other Buy-rated stocks: Linkedin Corporation (NYSE: LNKD), Wayfair, Inc. (NYSE: W). Other Sell-rated stocks Orbitz Worldwide (NYSE: OWW).
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