Amazon vs. Meta: It’s hard to believe, but the internet, or the World Wide Web, has been around for almost 35 years now. Over the years, it has brought major changes like the dot-com boom and bust at the start of the 21st century. Now, it’s driving the new wave of technology, especially the AI boom.
Recently, top analyst Deepak Mathivanan from Cantor, who ranks among the top 1% of analysts according to TipRanks, shared his thoughts on how AI is impacting the online sector.
He stated, “Even though the internet sector has performed well in the past 18 months, we think the current valuations are still fair, and the sector will likely benefit from upcoming interest rate cuts.
However, as revenue growth slows and the effects of cost-saving measures fade, we expect fewer positive earnings revisions, which have been a big factor in outperformance in recent years. Moving forward, we believe that being selective in stock picking is key to generating high returns in the Consumer Internet sector over the next 12 to 18 months.”
This selective approach is something Mathivanan excels at, and he has identified two top internet stocks to buy right now: Amazon (NASDAQ: AMZN) and Meta Platforms (NASDAQ: META). Let’s take a closer look at why these stocks are worth considering for investors.
Amazon (AMZN)
The first stock Mathivanan highlights is Amazon, the global leader in online retail. The company survived the dot-com crash 25 years ago and has grown far beyond its origins as an online bookstore. Today, Amazon sells almost everything imaginable and has built an impressive network of warehouses and shipping centers to ensure fast delivery worldwide.
For customers, this makes Amazon the most convenient online shopping destination. For Amazon, it has created a profitable core business that allows the company to invest in new ventures, particularly in tech. Amazon Web Services (AWS), its cloud computing division, is a prime example. AWS has become a major revenue driver, especially as it integrates AI technology.
In its latest financial report for the second quarter of 2024, AWS showed a 19% year-over-year revenue increase, generating $26.3 billion. This accounted for nearly 18% of Amazon’s total revenue for the quarter, which reached $148 billion a 10% increase from the previous year. While total revenue fell short of expectations by $760 million, Amazon’s earnings per share (EPS) came in at $1.26, significantly higher than the 65 cents per share in the same quarter last year.
Mathivanan remains optimistic about Amazon’s future, highlighting the potential for further growth in both retail and cloud computing. He believes Amazon’s leading position in two major markets consumer retail and software gives it strong growth potential over the next 12 to 18 months. Based on this, he initiated coverage of Amazon with an Overweight (Buy) rating and set a price target of $230, suggesting a potential 24.5% gain in the next year.
Overall, Amazon has received 43 analyst reviews, with 42 recommending it as a Buy. The stock is currently trading at $184.52, and analysts have set an average target price of $222.88, indicating a potential 21% upside.
Meta Platforms (META)
The second stock Mathivanan recommends is Meta Platforms, formerly known as Facebook. Like Amazon vs. Meta is a giant in its field, particularly in social media, and it owns popular platforms like Facebook, Instagram, Messenger, and WhatsApp. These platforms allow Meta to reach nearly half of the world’s population.
Meta generates most of its revenue through digital advertising, which is based on the user data it collects through its social media platforms. In 2023, the company generated $134.9 billion in revenue, largely from this advertising model.
Meta is also heavily invested in artificial intelligence (AI). The company uses AI to improve its advertising strategies, and whenever we see personalized ads or recommendations on Facebook or Instagram, it’s a result of Meta’s AI technology. Looking ahead, Meta is developing an open-source AI model called “Llama,” which aims to make AI more flexible and accessible to a wide range of users.
Financially, Meta reported strong results for the second quarter of 2024. The company posted revenue of nearly $39.1 billion, up 22% year-over-year and $760 million above expectations. Its EPS came in at $5.16, beating forecasts by 40 cents per share.
Mathivanan is highly optimistic about Meta’s future, citing its ability to grow its market share and generate strong revenue growth over the next two to three years. He believes AI investments could lead to even higher earnings than currently expected. As a result, he rates Meta as an Overweight (Buy) and set a price target of $660, implying a potential 29% gain in the next year.
Overall, Meta has received 45 analyst reviews, with 41 recommending it as a Buy. The stock is currently trading at $511.83, and analysts have set an average target price of $584.82, suggesting a potential 14% upside over the next year.
Conclusion
Amazon vs. Meta are top picks among internet stocks, according to Mathivanan. With their strong positions in key markets Amazon in online retail and cloud computing, and Meta in social media and digital advertising both companies offer strong growth potential for investors over the next year.
