With the new presidential administration set to come to power in less than two weeks, there is a sense of change in the air. Some changes are already evident – President-elect Trump has made clear his intention to implement new tax policies, and his previous term in office has already shown that he favors pro-business, growth-oriented economic policies, combined with economic deregulation. This combination promises to keep the good times going in the stock markets.
Monitoring the situation from Wolfe Research, analyst Shweta Khajuria opines that there are plenty of options for investors aiming to cash in on the rising tide. In her view, healthy consumer demand, low interest rates, and low unemployment would provide a broad base of support for the economy as a whole – and for internet stocks, as she prefers them.
“We remain opportunistic in the internet sector. We expect fundamentals to remain stable with healthy overall revenue growth from penetration gains, product launches, continued margin expansion, and capital allocation efforts,” Khajuria said.
Digging into the details, the 5-star analyst picked Amazon ( NASDAQ:AMZN ) and Meta Platforms ( NASDAQ:META ) as two of the best internet stocks to buy right now. According to TipRanks’ database, these “Magnificent 7” stocks also receive a “Strong Buy” rating from the rest of the stocks on the Street. Let’s dive into the details and take a closer look at each of them.
Amazon
The first stock we’ll look at is Amazon, the world’s leading e-commerce company and a fast-growing giant in both cloud computing and artificial intelligence services. Amazon was founded in 1994 and has proven its ability to survive — the company lived through the bursting of the dot-com bubble and grew from its origins as an “online bookseller” to become a one-stop shop for the digital world. As the world’s leading e-commerce company, Amazon prides itself on its ability to deliver any product anywhere, and it delivers. The result is a giant company, with a market cap of $2.39 trillion.
Amazon’s online retail is its core business, and it accounted for 83% of its total revenue in the third quarter of 2024, it reported last period. Of its total revenue of $131.4 billion, $95.5 billion came from its North American segment. $35.9 billion came from international sales. The company saw its highest year-over-year revenue growth in its cloud computing subscription service, AWS, which expanded 19% year-over-year to $27.5 billion. Amazon’s third-quarter revenue totaled $158.9 billion, up 11% from a year earlier and beating expectations by $1.6 billion. Amazon reported free cash flow of $47.7 billion for the 12 months ended September 30, 2024, up 123% year over year, and the company ended the third quarter with more than $78 billion of cash and liquid assets on hand.
What all this means is that Amazon has deep pockets and plenty of resources to expand and modernize its e-commerce and cloud computing activities. The company is doing just that and making strong use of AI while doing so.
On the retail side, Amazon is using artificial intelligence to improve its customer interfaces. The company has introduced an AI-powered shopping assistant to make it easier to search its retail database for exactly the right product at the right price, and is already using AI to improve its online advertising activities. On the cloud side, Amazon is integrating AI capabilities and tools into the AWS platform and is working with AI developer Anthropic to build generative AI models for Bedrock, Amazon’s cloud AI platform. Additionally, Amazon, under the auspices of AWS, is developing and launching a family of semiconductor chips, Trainium, specifically designed for training artificial intelligence and natural language systems.
Bottom line, all of this has made Amazon enormously profitable. The company reported earnings of $1.43 per share in the third quarter of 2024, a number that was 29 cents better than expectations. Additionally, Amazon stock has risen 49% in the past 12 months, outpacing the Nasdaq’s 31% gain by a wide margin.
Checking in with analyst Khajuria and Wolf’s view, we find her bullish on Amazon, specifically citing the company’s strengths. Khajuria writes, “We named AMZN a Top Pick at the time of our launch on July 24, and we continue to build on it based on our three-pronged thesis: i) retail margins driven by operational efficiency gains, automation, ad revenue growth, and sustainable international profitability; 2 ) Healthy and sustainable AWS revenue growth in the HT% range driven by demand for AI-based inference workloads, Trainium chipsets, and Anthropic 3) Continuing consolidation of market share driven by fast delivery speeds and availability of non-optional items.
Moving forward from this position, Khajuria places an Outperform (i.e. Buy) rating on AMZN stock. This is complemented by a $270 price target that suggests a one-year upside potential of 21%. (To watch Khajuria’s record, click here)
Overall, this e-commerce behemoth has a Strong Buy consensus rating from the Street, based on 47 recent analyst reviews that show a lopsided split of 46 Buys for just one Hold. Shares are priced at $222.11, and their average price target of $249.62 suggests they will gain 12% in the next year. (See AMZN stock forecast)
Meta platforms
The second stock we’ll look at here today is Meta Platforms, the global social media leader and parent company of Facebook, along with Instagram, Messenger, and WhatsApp. The Meta family of social apps had a collective number of DAP, or daily active people, of 3.29 billion in September 2024 — meaning this company can effectively reach 41% of the world’s population. This is a huge number, and confirms the effectiveness of Mark Zuckerberg’s company in transforming social media into a global force.
Meta used its unprecedented reach to support its revenue-generating activities, primarily digital advertising. The company’s huge audience gives it access to a vast amount of data, which can be used to improve online advertising campaigns or simply sold to advertisers. In its latest quarterly report, covering the third quarter of 2024, Meta announced an 11% year-over-year increase in the average price paid per ad on its platform. This strong metric helped push the company’s total revenue in the quarter to $40.59 billion, beating expectations by $280 million with 19% year-over-year growth. Meta stock, like Amazon stock above, has outperformed the broader markets by a wide margin, rising 73% in the past 12 months.
Meta’s success is beyond doubt. The company has achieved this success by adapting to changes in the digital landscape — some of those changes brought about by the social media revolution it helped launch. A good example of this is the company’s response to Twitter Power, or X, as owner Elon Musk renamed it. Meta developed its own thread-based application, appropriately named Threads, which it launched in July 2023 as a competitor. While Threads has not yet reached X popularity, it has reached 200 million active users.
Meta is also expected to benefit from a law passed by Congress that was upheld at the federal appeals level last month. The law requires the Chinese company ByteDance to divest itself of the popular social video application TikTok, if it wants to keep the application available in the United States. If the Chinese company does not comply, it risks TikTok being banned from US internet providers. While such a ban would be difficult to implement at best, the possibility of it occurring could give Meta a boost. Meta has developed several of its own social video apps (Reels and Stories on Facebook) and is in a strong position to attract a significant portion of TikTok’s 170 million audience should the Chinese app get banned.
The upshot of all this is that while Meta may be the “old man” in the rapidly evolving world of social media, he is far from dying. The company is nimble and adaptable, and has proven its ability to confront changing circumstances while generating good profits. Its Q3 2024 earnings number came to $6.03 per share, beating expectations by 74 cents and growing 37% year over year.
For Wolfe’s Khajuria, the key here is that Meta’s suite of social apps, its strength in video apps, and its ability to meet changing conditions make the company a “best choice.” As she put it, “We remain constructive despite the significant outperformance over the past two years given our view that Street estimates point to the upside. Our thesis: i) We believe video consolidation is underappreciated based on our detailed analysis, and expect an uptrend through Street estimates for 2025. By MSD $B; 2) We quantify the opportunity for subjects as likely to add LSD $Bs with monetization starting in year 25; 3) TikTok’s divestiture is still uncertain, but if it happens, we see an 8-10% upside in EPS; 4) Clean AI narrative where multi-year investments are better positioned to show ROI potential.
Bottom line, Khajuria puts an Outperform (i.e. Buy) rating on Meta, and backs that up with a $730 price target, demonstrating her confidence in the potential for a 16% upside over the next 12 months.
Meta has 43 recent analyst reviews on file, broken down into 39 Buys, 3 Holds, and 1 Sell. Shares are currently trading for $617.89, and the average price target of $683.72 suggests a potential one-year gain of 10.5%. (See Meta stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.