Piper Sandler Optimistic on Q3 Earnings for Internet Stocks: Google, Pinterest in Focus

2024-08-08 145 Comments

Piper Sandler released its forecasts for internet stocks on Monday in preparation for the third-quarter earnings season. The research firm said it has a favorable view of Google (GOOGL.US), Pinterest (PINS.US), and Reddit (RDDT.US), while being cautious about Amazon (AMZN.US) and Snap (SNAP.US).

The research firm added that Google is its top pick, expecting the company to report third-quarter revenue of $86.5 billion and operating profit of $26.5 billion. "The ad check is positive, with Gemini's integration with search driving higher spend through increased efficiency. We believe antitrust concerns are already reflected in the stock price. Additionally, we like the new CFO Ashkenazi and see opportunities to reduce operating costs/human resources."

Amazon remains Piper's top pick in the large-cap space, but the research firm had mixed feelings about the stock's outlook at the time of the report's release. They expect Amazon's third-quarter revenue to be around $157 billion (up 10% year-over-year), with operating profit of $14.8 billion. For the fourth quarter, revenue is expected to be between $180 billion and $186 billion, with EBIT between $16 billion and $18 billion. "The third-quarter guidance broke the margin expansion, and Wall Street's expectations for the company's NTM EBITDA fell for the first time in five quarters. In terms of advertising, our buyers noted that Amazon still has the best attribution, but the lack of inventory growth to drive higher CPC is a limiting factor for further expanding spend."

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For Pinterest, Piper believes the stock is worth buying and said it expects third-quarter revenue of $892 million (up 17% year-over-year) and EBITDA of about $212 million. "Admittedly, the stock feels like it's taken two steps forward and one step back, but execution continues despite the stock price falling more than 25% from its highs. Surveys found that product changes are driving better engagement, and we like the new CAPI/AWS features."

Piper expects Meta (META.US) to report second-quarter revenue of about $40 billion (up 16% year-over-year) and EBITDA of about $20 billion. "Our checks were again positive, driven by improving performance from Advantage+Reels, and Instagram remains a strong platform for e-commerce. The first quarter of 2025 will be the most challenging in terms of year-over-year comparisons, but Meta has guided for 23% growth in the third quarter."

For Reddit, the firm said it believes the stock is worth buying due to strong user growth, improving ad manager data, and the lowest incremental profit expectations compared to peers for 2025-2026.

Regarding Snap, Piper said that although company data from Snapchat+ suggests an acceleration in growth for the third quarter, the checks remain "mixed."

On eBay (EBAY.US), Piper noted that despite a 48% increase year-to-date, its valuation remains compelling at about 10 times NTM EBITDA. "With the increasing likelihood of GMV growth in the second half of the year, we still believe the stock is worth buying. Additionally, U.S. GMV versus brick-and-mortar retail growth has been improving since the first quarter of 2022, and Wall Street's expectations now imply a slowdown."

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