There’s still some opportunity among large-cap internet stocks, but investors should steer clear of two names, according to Goldman Sachs.
Goldman’s Eric Sheridan initiated coverage of 17 larger-capitalization internet stocks late Sunday and assigned sell ratings to Airbnb Inc. ABNB, +2.36% and Twitter Inc. TWTR, +0.94% shares. Airbnb’s stock is off 2.8% in Monday trading, while Twitter’s is down 3.4%.
While Sheridan expects that Airbnb will continue to outgrow the broader online travel industry over the next five years, he sees a negative risk-reward balance on the stock.
Sheridan wrote that investors seem to have high conviction that Airbnb will benefit from a “new normal” for travel given the emergence of more flexible work/life structures, meaning that they would be able to travel more freely and spend more time at their destinations. But he’s “not yet convinced of that outcome having a high probability” and argues that significant investor optimism about this dynamic is already priced into Airbnb’s stock.
He set a $132 price target on the stock, which changed hands just above $160 as of midday Monday.
Sheridan also worries about the risk/reward trade-off on Twitter, writing that he thinks the advertising recovery is priced into the shares.
Another key issue for Twitter is whether the company can successfully use new features like audio rooms, newsletters, and tip jars to boost engagement and monetization. Twitter has been increasing the pace of feature introductions recently after gaining a reputation for being slow on innovation, but “the probability of success of these platform evolutions remains an open question,” Sheridan wrote.
He set a $60 price target for the stock, which recently changed hands at $59.44.
Sheridan was more upbeat on other elements of the internet universe, assigning buy ratings to shares of Amazon.com Inc. AMZN, -0.10%, Facebook Inc. FB, +0.07%, Alphabet Inc. GOOG, +0.20% GOOGL, +0.10%, Snap Inc. SNAP, +0.56%, Uber Technologies Inc. UBER, -1.93%, Lyft Inc. LYFT, -1.45%, and Expedia Group Inc. EXPE, +0.32%
He is neutral on shares of Pinterest Inc. PINS, -1.47%, Chewy Inc. CHWY, -1.72%, Netflix Inc. NFLX, -1.66%, Peloton Interactive Inc. PTON, -0.71%, Spotify Technology SA SPOT, +0.21%, Booking Holdings Inc. BKNG, +0.05%, and DoorDash Inc. DASH, +0.63%
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