JPMorgan’s Top 3 Internet Picks Right Now

The slide in internet stocks since their third-quarter earnings season kicked off unofficially with Netflix ’s (ticker: NFLX) report in mid-October could lead to opportunity for investors considering Facebook (FB), Amazon.com (AMZN) and Twitter (TWTR).

Just five of the 28 internet stocks covered by JPMorgan Chase have risen since then, analyst Doug Anmuth wrote Thursday, with the group falling 9%—three times as far as the S&P 500.

“Overall sentiment on the group remains mixed, with growth and regulatory concerns weighing on the large-caps, and investors increasingly wary of [small- and] midcaps given a number of sharp earnings-driven declines,” he said.

Anmuth listed Facebook, Amazon and Twitter as his “top picks” in the sector.

• Anmuth doesn’t discuss the latest New York Times investigation into Facebook. The story, published Wednesday night, contains some dramatic allegations, such as that Facebook executives ignored, and then concealed, warning signs about various scandals. Facebook on Thursday responded to the report, saying it was inaccurate. Its shares were down about 2% Thursday morning to near $141.

Anmuth’s note, meanwhile, addressed broader concerns about Facebook.

“We acknowledge ongoing concerns around engagement and shifting social behavior, but we view the 2 billion-plus user base as stickier than most believe,” Anmuth wrote. “We also view revenue deceleration as manageable, particularly as Facebook continues to improve ad products and drive strong returns, and marketers do not have good alternatives to Facebook’s scale and return on investment.”

Facebook shares are down about 20% in 2018.

• At Amazon, Anmuth wrote, the “core retail trends remain strong.”

”We look for accelerating growth in the first quarter of 2019 and we believe profitability will remain strong driven by Amazon Web Services and advertising, even [despite] fourth-quarter offsets related to higher wages and free shipping in the U.S.,” he wrote.

Anmuth believes Twitter’s efforts to improve the quality of the discussion on its platform are working.

“Twitter’s platform is strengthening as product improves, and heightened health work efforts will be positive for both users & advertisers over time,” he wrote. “Twitter is becoming increasingly relevant to large advertisers, particularly through video.”

Twitter’s stock was recently about flat near $33, and up 36% this year so far.

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