Top 5 internet stocks according to Citi and why to buy them now

Analysts at Citigroup released a ranking of internet stocks Wednesday that investors may want to consider if they’re looking to make money off companies underpinning the vast web.

The brokerage has 16 internet stocks in its coverage area, ranging from Facebook Inc. FB, +0.31% , its top pick, to Twitter Inc. TWTR, +0.40% , the only stock it rates as a sell.

Here are Citi’s top five internet stock picks in order:

Facebook: The social media giant has “significant opportunity in video, Instagram, messaging” and other areas of business, according to Citi. Growth is expected to slow in the near term as Facebook reduces ad load, but that is widely expected. Facebook is also still in early stages of monetizing Instagram, its popular photo-sharing app, and messaging app WhatsApp. Last quarter, Facebook reported a 51% increase in revenue to $8.81 billion as it continued to grow mobile users and sell mobile ads.

Citi has a buy rating and $165 12-month price target on the stock. Shares of Facebook gained 0.3% to $137.69 on Wednesday and have increased nearly 16% in the past three months and 30% in the past year, outperforming the S&P 500 index SPX, -0.23% , which is up 5.5% in the past three months and 20% in the past year.

Alphabet: Last quarter, Google’s profit margins slipped to 76% from 78% in the year-earlier period. However Citi said “focusing on margin compression misses the big picture.”

The brokerage ranks Alphabet Inc. GOOGL, +0.29% GOOG, +0.42% a buy with a $985 price target on the stock. Shares of Google have gained 7.5% in the past three months and 20% in the past year, virtually in line with the S&P 500. They increased 0.5% to $855.76 on Wednesday.

Amazon: Citi has a buy rating and $960 target on Amazon stock. Shares of Amazon gained 0.5% to $850.58 on Wednesday and have increased 11% in the past three months and nearly 52% in the past year, outperforming the S&P 500.

Priceline: The travel bookings site is the “clear market leader” in hotel bookings, which Citi said is “the most attractive online travel sector.” Last quarter, Priceline Group Inc.’s PCLN, +0.40% revenue jumped more than 17% year-over-year, which it attributed to strong growth in hotel revenue.

Citi has a buy rating and $1,880 price target on the stock. Shares of Priceline gained 0.7% to $1,748.29 in afternoon trade and have climbed 13% in the past three months and more than 36% in the past year, outperforming the S&P 500.

EBay: This is an interesting pick because of the intense competition it faces against much stronger and larger rival Amazon. However, Citi touts eBay Inc.’s EBAY, -0.45% “modestly improving growth,” potential for “significant capital returns” and value stemming from strategic mergers and acquisitions as reasons why it’s a fairly-valued stock that’s worth buying.

It’s also a much cheaper stock. Citi has a buy rating and $36 price target on eBay. Shares of the online marketplace fell 0.3% to $33.37 on Wednesday and have gained 13.4% in the past three months and 38.6% in the past year, outperforming the S&P 500.

MarketWatch

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