The internet stocks to own in 2024, according to Wedbush

Looking ahead to 2024, Wedbush said it believes leading consumer internet platforms remain well positioned with rising margins and improving industry growth rates across e-commerce and digital advertising. For the upcoming year, the firm’s top ideas by vertical are Amazon (AMZN) in e-commerce, Meta Platforms (META) in Digital Advertising, Booking Holdings (BKNG) in Online Travel, and Uber (UBER) in Mobility.

INTERNET SPACE: In its 2024 internet outlook, Wedbush highlighted five key themes across its coverage. First, the firm sees a return to trend for digital ads and e-commerce as it expects more normalized growth rates for e-commerce and digital advertising in 2024 with both industries positioned to accelerate next year. Second, Wedbush sees retail media remaining one of the fastest growing segments of digital advertising with growth of about 22% in 2024.

Third, while travel is slowing, the firm believes it will be better than feared. Fourth, Wedbush says that recently launched and upcoming generative AI services from Amazon, Google (GOOGL), and Meta are positioned for increased adoption and monetization in 2024 as the number of available services and use cases expands. Lastly, Wedbush notes the past two years have ushered in an era of cost discipline that should persist in 2024, and that it expects margins to rise next year for 14 out of the 16 companies in its coverage.

TOP IDEAS: For 2024, the firm’s top ideas by vertical are Amazon in e-commerce, Meta Platforms in Digital Advertising, Booking Holdings in Online Travel, and Uber in Mobility.
Amazon is the firm’s top pick across its internet coverage, as Wedbush thinks the company is well positioned for 2024 with retail margins continuing to rise, AWS accelerating against easing comps, and advertising revenue growth continuing to materially outperform the broader digital advertising industry.

Meanwhile, Wedbush lowered Google to number 2 within Digital Advertising and raised Meta to number 1, saying 2024 presents a relatively more challenging year for Google given the recent deceleration of Google Cloud, uncertainty related to its AI initiatives, and the unknown impact that generative AI will have on Search.

Booking is the leading OTA globally with an expected 1B-plus room nights booked across its brands portfolio in 2023, the firm says. Wedbush argues that recent changes to the business model should support growth above pre-pandemic levels as demand normalizes. The firm expects long-term margins to trend toward 35%-plus with excess cash allocated to buybacks.

Additionally, the firm believes Uber has built a highly defensible moat, and about 90% of Uber’s mobility gross bookings are generated in markets where Uber already has the number one category position. It sees several catalysts for sustainable growth, including deeper international penetration, vertical expansion across grocery/retail, and cross-selling opportunities which are underpinned by Uber’s leading membership program, Uber One.

TARGET CHANGES: The firm adjusted several target prices to reflect its latest views heading into 2024. Wedbush raised the targets for Outperform-rated MercadoLibre (MELI) to $1,800 from $1,700, Outperform-rated Meta to $420 from $350, Neutral-rated Pinterest (PINS) to $35 from $32, Outperform-rated Booking Holdings to $3,850 from $3,300, Neutral-rated Expedia (EXPE) to $130 from $115, and Neutral-rated Lyft (LYFT) to $14 from $12. On the flip side, the firm lowered its price target for Neutral-rated Instacart (CART) to $26 from $30.