By Angela Palumbo
Many tech stocks had a blowout year, but some are still underperforming the broader market. This Truist analyst has picked several internet stocks that have been through either booms or busts that he believes will shine in 2025.
Youssef Squali wrote in a research note on Tuesday that he has confidence the positive tailwinds that have helped push some tech stocks higher in 2024, including excitement over artificial intelligence and the strength in e-commerce, will continue in the new year. He's also optimistic about the opportunities awaiting several 2024 underperformers in the months to come.
These are four internet stocks Squali named as his 2025 favorites.
Amazon
Amazon.com stock has had a strong 2024, up 51% compared with the 33% increase in the tech-heavy Nasdaq Composite. The massive e-commerce company has been one of the major beneficiaries of the generative AI investment hype, as investors have bought up shares with confidence that the company's AI tech will help boost growth.
It isn't cheap for Amazon, or any other company for that matter, to grow their AI initiatives. On Oct. 31, Amazon reported third-quarter capital expenditures of $22.6 billion, up from $12.5 billion in the previous year. Most of that spending is meant to support the growing need for technology infrastructure, primarily relating to the cloud-computing platform Amazon Web Services, as the company puts money into meeting demand for AI.
"Recovery in Cloud demand and the triple-digit growth contribution from Gen-AI related workloads for training and inference should help sustain elevated margin levels of 30%+ even as the company invests aggressively in Cloud and AI infrastructure," Squali wrote, adding that capital expenditures in 2024 will be about $75 billion, then increasing again in 2025, but "we believe the company has earned the right to invest aggressively ahead of this massive opportunity."
Squali rates Amazon as a Buy with a $270 price target.
Meta
Meta Platforms stock soared 76% this year, and Squali sees more room for it to run ahead. He rates the Facebook parent as a Buy with a $700 price target and recommends it as another top pick for 2025.
Meta shares have jumped over excitement for both AI and virtual reality projects. The company has also seen an increase in daily active users for its family of apps, including Instagram and Whats App. That's important for advertising dollars, the company's largest source of revenue.
"User engagement is also coupled with improving monetization from Reels where the company has been driving more personalization and ad load," Squali said. Reels is Meta's video sharing segment that directly competes with Alphabet's YouTube Shorts and TikTok. The looming ban of TikTok, which has 170 million monthly U.S. users, could also be a boost to Meta, Squali said.
Cimpress
Cimpress invests in and builds entrepreneurial and mass-customization businesses such as Visraprint. Unlike the megacap tech stocks Squali likes for next year, Cimpress has underperformed the broader market, falling 1.1% in 2024.
Despite this underperformance, Squali believes 2025 is Cimpress' year. He rates the stock as a Buy with a $110 price target.
"CMPR is now past its multi-year tech, branding and products retooling efforts, and has set the stage for greater product and marketing velocity to drive more consistent growth, higher profitability and gain share from offline peers," he wrote.
Oddity
Oddity Tech is an online retail company for the cosmetics space. It uses AI to help shoppers find beauty and wellness products, and owns the brands IL Makiage and Spoiled Child. Shares have only risen 5.4% this year.
Squali rates Oddity as a Buy with a $60 price target. He believes that the company is in a good position to gain market share in the massive beauty and wellness space, which continues to move more online.
"In FY23, over half of ODD's net revenue came from repeat purchases and management disclosed on the last earnings call that repeat purchases are on track to account for an even higher portion of revenues in FY24, which attests to the stickiness, the efficacy of the company's products and predictability of growth," Squali wrote.
Write to Angela Palumbo at angela.palumbo@dowjones.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
December 17, 2024 15:17 ET (20:17 GMT)
Copyright (c) 2024 Dow Jones & Company, Inc.
Comments