One of the biggest stories for the past few years has been the incredible market leadership of the mega-cap technology stocks. Last week some of the biggest players posted massive earnings, and as usual shares exploded higher. The conundrum for investors is this: with many of these top companies trading at bloated multiples, is there enough upside remaining from current levels?
One outstanding place to look now may be at the small and mid-cap leaders in the internet and digital media arena. While they too have performed nicely, they are offering growth investors with more risk tolerance some outstanding upside potential for the rest of 2020 and beyond.
The analysts at Truist Securities, which was formed by the merger of SunTrust Robinson Humphrey and BB&T Capital Markets, are out with an update on the arena and the firm’s top stock picks there. We selected five of the small and mid-cap top picks, and all are rated Buy. It’s important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.
This company is probably the most well known for constructing websites. GoDaddy Inc. (NYSE: GDDY) is a technology provider to small businesses, web design professionals and individuals. It delivers cloud-based products and personalized customer care. The company operates a domain marketplace, where its customers can find the digital real estate that matches their idea. It provides website building, hosting and security tools to help customers construct and protect their online presence.
GoDaddy provides applications that enable connecting to customers and managing businesses. It also provides search, discovery and recommendation tools, as well as a selection of domain name for ventures. It provides productivity tools, such as domain-specific email, online storage, invoicing, bookkeeping and payment solutions to run ventures, as well as marketing products.
The company proved again that it can deliver consistent execution in any weather as first-quarter results were strong. Analysts feel that the company can be a low teens revenue grower, with steady free cash flow margin improvement, plus a $500 million reloaded share buyback program after $1 billion purchased over the past year. GoDaddy has new product offerings, including a new freemium option.
The Truist Securities price target for the shares is $88, and the Wall Street consensus target is $89.46. GoDaddy stock closed Tuesday at $73.23 a share, after a 4.3% gain on the day.
This is a top internet pick at Truist Securities with solid upside to the target price. IAC/InterActiveCorp (NASDAQ: IAC) operates as a media and internet company worldwide.
Its various platforms include Ask.com, which empowers people to find, learn and explore answers from any device or location. Bluecrew is an on-demand platform for flexible W-2 work job seekers for sustainable and reliable employment that fits their schedules across a range of industries, including warehousing, logistics, e-commerce, events, delivery and hospitality. Care.com is a leading platform for finding and managing family care, and Dotdash helps people to find answers and solve problems.
The company also operates Newco, a platform for entrepreneurs to build a business, and NurseFly, a marketplace for health care staffing that empowers nurses and health care professionals by giving them access to transparent and accurate information to aid in their job search.
IAC also owns The Daily Beast, which provides opinion and independent takes on politics, world news, pop culture and entertainment. And it owns Vimeo, a professional video platform and community, and a marketplace for home services.
Truist Securities has a $135 price objective, but the consensus target price is much higher at $157.14. Tuesday’s closing price for IAC stock was $133.85.
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The Truist team continues to love this company. Match Group Inc. (NASDAQ: MTCH) is the worldwide leader in online dating products in terms of revenue, monthly active users and paid members. Its portfolio of dating sites includes several of the most popular products such as Match, Meetic, OKCupid, Tinder, POF and Twoo. It has four of the top-five highest-grossing dating apps in North America and three of the top-five worldwide.
With ever more Millennials turning to online dating, the prospects for this company are incredibly strong. Toss in the computer literacy of young Americans, and it makes sense that the stocks in this area would show robust growth. Some top analysts on Wall Street feel that as much as a stunning 50% of all dates will begin online by 2022.
The $110 Truist Securities price target compares with the $105.74 consensus target. Match stock ended trading at $107.57 on Tuesday.
This off-the-radar company had a reasonably hot initial public offering in 2018. SVMK Inc. (NASDAQ: SVMK) is a cloud provider of online survey development applications for individuals and enterprises. The firm’s SurveyMonkey enables enterprises to engage proactively with customers and employees through surveys used to gain insight into satisfaction metrics, applications for simplifying market research, as well as analytical tools to identify areas for improvement.
The analysts have noted in the past that as a price disruptor and lightweight solution in the enterprise feedback space, they believe SVMK’s competitive positioning has improved since the COVID-19 crisis began, with companies and organizations around the world seeking feedback from their stakeholders.
Truist Securities has set a $27 price target. The consensus target is $25.11, and the last SVMK stock trade for Tuesday came in at $25.23.
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This is among the highest-profile companies in the mid-cap club and may be the most exciting idea of all. Uber Technologies Inc. (NYSE: UBER) is a mobility platform that services 63 countries, more than 750 ridesharing markets and over 500 Eats markets, and nearly half of its core platform revenue is generated outside of the United States.
The company’s monthly average paying customers represent 1% to 2% of the world’s population on a monthly basis. For rides, Uber acts as an intermediary, connecting riders with drivers. For Eats, the market is three-sided, connecting customers, restaurants and drivers. Uber also has an emerging freight business.
Uber is expected to continue to benefit from decreasing competitive intensity in U.S. ridesharing. Many on Wall Street feel there is an opportunity for Uber to benefit from increasing disclosure, and they see potential stock support from sum-of-the-parts valuations.
The Truist Securities price objective is $50. That is higher than the $40.96 consensus target. Uber stock gained almost 5% on Tuesday to close at $32.68 a share.
The Truist Securities analysts are very positive these five top stocks that could offer solid upside potential. It should be noted that all are better suited for aggressive growth accounts, as another market downturn like the one we saw back in February and March could push their shares down hard.