Cantor Fitzgerald's Top 3 Internet Stock Picks

February 23, 2015

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With its Second Annual Internet and Technology Conference being held in New York this week, Cantor Fitzgerald released a report summarizing its 2015 outlook for Internet stocks. The report included analysts’ top Internet stock picks for 2015.

Normalizing Returns

According to the Cantor Internet Index, Internet stocks spiked about 50 percent in 2013 and dropped about 8 percent in 2014. Analysts believe that 2015 will be a year of normalized returns after the extreme volatility in the space in the past two years. Online advertising grew 16 percent in both 2013 and 2014, and e-commerce grew 16 percent and 17 percent during the two years. Analysts are forecasting another year of mid-teens growth for advertising and e-commerce in 2015.

Online Advertising

In the internet advertising space, analysts are predicting $119 billion and $136 billion in online advertising budgets in 2015 and 2016, respectively. While search has been the leader in growth during the past decade with a 28 percent compound annual growth rate (CAGR) during the stretch, analysts believe that display will lead the growth charge in coming years.

Analysts project that over the next 10 years, marketers will be shifting a large amount of their television advertising budgets online. Analysts are forecasting a 17 percent CAGR for display advertising and a 13 percent CAGR for search advertising over the next three years.

Top Picks

Cantor Fitzgerald analysts see a favorable environment for Internet stocks in 2015 based on strong ad growth, relatively low expectations and reasonable stock valuation levels. Cantor Fitzgerald’s top picks in the space are Facebook Inc (NASDAQ: FB), Google Inc (NASDAQ: GOOG) (NASDAQ: GOOGL) and Priceline Group Inc (NASDAQ: PCLN). The firm has Buy ratings on all three stocks.