The SPDR S TR/S&P INTERNET ETF (NYSE: XWEB) has gained about 9% year-to-date, underperforming the Nasdaq Composite Index, which has soared about 34% in the same period.
Given the catching up the subsector has to do, Rosenblatt Securities is making predictions for 2020 for the Internet stocks in its coverage universe.
a Buy rating on Spotify Technology SA (NYSE: SPOT) with a $184 price target;
a Buy rating on Shopify Inc (NYSE: SHOP) with a $481 price target;
a Neutral rating on Trade Desk Inc (NASDAQ: TTD) with a $188 price target;
a Sell rating on Wix.Com Ltd (NASDAQ: WIX), with a $93 price target.
Facebook Stock To Breakout On Fading Antitrust Concerns?
Ahead of the 2020 election, the FTC will not recommend a breakup of Facebook, alleviating concerns and reverting the valuation multiple of the stock from near its year-to-date lows to its historical trading range, Zgutowicz said in a Sunday note.
The regulatory agency would be required to prove that Instagram might have developed into a serious competitor for Facebook if it weren't acquired by the company, the analyst said.
Spotify OTT Video Platform Partnership In The Offing?
The synergies associated with a music and video tie-up are likely to drive Spotify into a partnership with video platform, according to Rosenblatt.
The firm expects more over-the-top video partnerships to be struck in 2020.
Spotify could offer increasing value to an OTT video partner in light of its more than 30 million paid U.S. subscribers and its 120 million global paid subscribers, Zgutowicz said.
Competitively strained Netflix Inc (NASDAQ: NFLX) is also on the potential partner list, he said.
Shopify's Fulfillment Revenue To Ramp?
Shopify's fulfillment revenue will make up about 10% of the total, the analyst said.
Given the pent-up merchant demand, Zgutowicz said he doesn't expect an extended long-tail revenue ramp.
Exiting 2025, the analyst estimates fulfillment revenue will ramp to over 50% of U.S.-Canada revenue on a 1.8% take rate.
This, according to Rosenblatt, is modest in light of the Amazon.com, Inc. (NASDAQ: AMZN) fulfillment network's 15% take rate.
Muted Revenue Expectations For Trade Desk
Rosenblatt's 2020 revenue estimate for Trade Desk is 4% below the consensus, with the variance accounted for by the analyst's more moderate expectations for U.S. billings and connected TV growth.
"We note 3Q19 US billings growth decelerated meaningfully y/y (to 34%) and q/q despite a much easier y/y comparison, indicating a more apparent reversion to addressable RTB industry growth, which we estimate at ~18% CAGR over the next 3 years."
Wix Revenue To Moderate To Align With Industry Norms
A projected lack of new product sell-through along with a lack of subscriber net add momentum will weigh on Wix revenue, Zgutowicz said.
Rosenblatt's 2020 revenue estimate for the cloud-based website development platform is 5% below the consensus estimate, with the revenue back-end loaded.
Following a moderation in Wix's S&M spend, the analyst said he expects its revenue to moderate and revert more quickly to industry norms.
The Price Action
At last check:
Facebook shares closed Monday's session down 1.77% at $204.41.
Spotify was down 2.19% at $149.81.
Shopify fell 2.85% to $396.36.
Trade Desk dropped by 7.21% to $252.72.
Wix.Com lost 0.46% to $121.25.
Photo from Pixabay.