Scott Devitt, analyst for Morgan Stanley, along with his team of analysts have reviewed several e-commerce and internet advertising companies to make predictions for the coming year. These predictions are based on a wide variety of factors, as well as years of experience in the investment world.
In regards to eCommerce websites, Amazon, Groupon and eBay were the favored online sellers for 2013. Amazon and Groupon have maintained their status, and their price targets have improved. Devitt increased Amazon from $404 to $435 and maintained Groupon’s at $15. Groupon is maintaining their target price despite the massive changes the company is undergoing. Groupon stock has increased dramatically over the last couple years.
According to Dewitt, his position on Amazon comes from being “increasingly confident that revenue and profitability growth can accelerate from 1) improved performance internationally; 2) Amazon Prime gaining momentum; and 3) AWS continuing to experience sizable growth in public cloud computing.”
However, he dropped eBay to Equal Weight. Their target price dropped from $58 to $57. According to Devitt, “While management deserves accolades for the business turnaround and is positioning eBay as a key player in omni-channel long term, we see risk to 2014-2015 estimates. Without positive catalysts that will allow investors to incorporate eBay’s omni-channel/offline initiatives into their numbers, we believe the current risk-reward profile is balanced.”
In regard to online advertising, Dewitt shows a preference for Facebook and Google over Twitter. Facebook’s target price was increased from $53 to $62 after taking into account the revenue brought in by Instagram and the newly launched News Feed video ads.
Google’s 12-month target price has been increased from $1,075 to $1,172. This confident prediction is partially based on the increasing growth of Google’s local ads opportunity. While Twitter use to be in the top 3, they have slipped in expectations. Devitt believes Twitter’s shares have surpassed their real value and will decline over the next year as people realize that.