January 08, 2016, TheStreet
Internet stocks had a mixed year in 2015, with companies like Netflix, Amazon and Alphabet surging 50%-to-100%, while Twitter, Alibaba and Yahoo! sunk as much as 40%.
Large-cap Internet stocks generally performed better than smaller stocks in the sector and 2016 will once again become "a stock picker’s market," according to Cantor Fitzgerald.
Cantor analyst Youssef Squali favors "high-quality names with identifiable catalysts at reasonable valuation," but stocks which have doubled like Netflix and Amazon, "will be challenged to show a repeat of 2015 in our view, considering raised expectations and current valuations," he wrote in a note on Thursday. (The analyst still rates the two companies at "buy.")
Still with the market turmoil this week, Internet stocks underperformed. For the week through Jan. 6, the Cantor Internet Index fell 4.8%; meanwhile, the S&P 500 Index, which declined 3.5%.
But Squali is still positive on several Internet stocks. "While it’s probably too early to call the bottom, we’d be buyers of quality names," Squali writes in a follow-up note to clients on Friday.
Here are six Internet stocks favored by Cantor Fitzgerald. We’ve paired the list with ratings from TheStreet Ratings, TheStreet’s proprietary ratings tool for another perspective. When you’re done be sure to check out Bank of America’s stock picks that will make big moves over the next three months.
TheStreet Ratings uses a quantitative approach to rating over 4,300 stocks to predict return potential for the next year. The model is both objective, using elements such as volatility of past operating revenues, financial strength, and company cash flows, and subjective, including expected equity market returns, future interest rates, implied industry outlook and forecasted company earnings.
Buying an S&P 500 stock that TheStreet Ratings rated a buy yielded a 16.56% return in 2014, beating the S&P 500 Total Return Index by 304 basis points. Buying a Russell 2000 stock that TheStreet Ratings rated a buy yielded a 9.5% return in 2014, beating the Russell 2000 index, including dividends reinvested, by 460 basis points last year.