Top RBC Capital analyst Mark Mahaney has just completed a tour of Silicon Valley’s hottest internet companies. TipRanks shows that five-star Mahaney is a top analyst to follow. As we can see here, his ranking of #14 out of 4,642 analysts is based on an impressive 74% success rate and 24.5% average return.
We took this opportunity to review three of Mahaney’s top internet stock picks. So let’s take a closer look at these premium ‘Outperform’ stocks now- all of which have serious growth potential:
1. Facebook (FB)
Facebook (NASDAQ:FB): for a while now this social media giant has been the No. 1 large cap internet pick for Mahaney. He recently revised his price target up to $195 from $185 saying:
FB might well be the Best Growth Story in Tech…. Core FB is growing extremely well, with almost unprecedented Ad Revenue growth consistency. More important, we believe that FB’s current low market shares—approximately 15% of Global Online Advertising and 5% of Global Total Advertising—will help it to maintain premium growth for a long time. And FB still has several new large revenue growth drivers (Instagram monetization, Messaging Platform monetization, Camera/AR AND Video).
Overall the stock has received 31 buy ratings from the Street versus just 2 hold and 2 sell ratings. FB may be trading at record highs but the average analyst price target of $192.52 suggests the stock still has further growth lined up. Indeed, analysts are forecasting close to 13% upside potential for FB over the next 12 months.
2. Expedia (EXPE)
Expedia (NASDAQ:EXPE): this leading online travel agency “is an excellent play on the secular growth in Online Travel” according to Mahaney. On August 30, following the appointment of new CEO Mark Okerstrom, he wrote “Still our #2 Long in Large Cap Internet, after FB.” Mahaney predicts a relatively seamless transition, saying “With him assuming the CEO role, we believe we will see 3 Cs at EXPE: Consistency, Continuity and Canadian flair.”
And the bigger picture remains firmly intact. The fast-growing company recently reported quarterly revenue of close to $2.6 billion, with AirBnB rival HomeAway reporting a 45% rise in gross bookings. According to Mahaney:
We expect the company will continue driving execution across its core set of global assets while investing aggressively in tech and marketing to scale up HomeAway. We see a tremendous growth runway for HomeAway in particular, as the company grows its footprint domestically and pushes into International markets next year.
The Street shares Mahaney’s confident take on the stock. Check out the ‘Strong Buy’ analyst consensus rating with 16 buy ratings and just 1 hold rating in the last 3 months. These analysts have a $174.73 average price target which suggests big upside potential of over 18% for the next year.
3. Zillow Group (ZG)
Zillow Group (NASDAQ:ZG): this online real estate database, founded by former Microsoft execs in 2006, is a top small-mid cap net pick for RBC Capital. In the last quarter ZG reported “intrinsically strong and consistent fundamental results.” This included a 29% revenue rise and Adjusted EBITDA Margin up 15%. Mahaney, who has a $49 price target on the stock vs the $39 current share price, says:
Across the ‘Net sector, Zillow remains one of the best growth stories. ZG can sustain premium growth (30%ish revenue growth & 40%ish EBITDA growth) because of its emerging growth categories (Rentals, StreetEasy, etc.) and because we believe it has less than 10% penetration of its core TAM ($600MM in 2016 Premier Agent revenue implies <10% penetration of market opportunity).
He adds that ZG also continues to benefit from a strong competitive position, an attractive business model (90% Gross Margins), and a highly effective management team.
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