This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Why It's Time to Buy Facebook, Priceline, Pandora and Netflix

Updated from 10:26 a.m. to include news on Facebook COO Sheryl Sandberg in the seventh paragraph.

NEW YORK (TheStreet) -- The technology industry has been hit hard, with high-growth names such as Pandora (P), (PCLN - Get Report), Netflix (NFLX) and Facebook (FB - Get Report) all having sharply corrected over the past few weeks. With these stocks down around 20% from their highs, now may be the time to buy, according to one analyst.

JPMorgan analyst Doug Anmuth noted that the recent selloff has "created some attractive opportunities in companies with continued strong fundamentals and growth potential ahead. Most of our discussions with investors point to initial concerns around rising interest rates, but quickly turn toward positioning and valuation."

With first-quarter earnings around the corner, these types of companies will have to demonstrate to investors that the recent selloff means little, and that the underlying strength in the companies' businesses is as strong as ever. Anmuth, who rates Facebook "overweight," said he believes that both Menlo Park, Calif.-based Facebook and Priceline provide the best combination of earnings power, growth and reasonable valuations, given the recent selloff.

Must Read: As iWatch Unveiling Nears, Major Questions Remain for Wearables

Facebook shares touched a high of $72.59 earlier this year as momentum in the social networker exploded, particularly after the company announced the pending WhatsApp acquisition for $19 billion in cash and stock (that has come down since a good portion of the deal was done in stock).

Anmuth noted that Facebook is still early in monetizing its massive user base, now over 1.2 billion monthly active users (MAUs), and 1 billion on mobile apps. "We believe advertiser demand through 1Q continued to build and comScore data suggests continued strong engagement," Anmuth penned in a note. "Facebook's share of overall Internet time in February was ~18%, while the company's share of mobile time -- excluding Instagram and Whatsapp -- expanded to 22% in February from 21% in January."

As Facebook continues to deliver high returns for its advertisers, it can start to charge higher prices for its ads, something AdWeek recently pointed out. Facebook's ad prices may have ramped 10% from the traditionally strong fourth quarter to the first quarter, indicating the platform is seeing the return on investment (ROI) advertisers want, and then some.

Editor's Alert: Facebook COO Sheryl Sandberg, who has been very instrumental in sealing advertising deals for Facebook, announced on The Today Show that she would not be leaving the company. This comes after Sandberg recently sold a large chunk of Facebook stock, prompting speculation that she was running for politics.

Aside from Facebook itself, there is Instagram, which recently surpassed 200 million MAUs, and recently announced its own big advertising deal. The deal, with advertising giant Omnicom, was originally reported as being worth $100 million, but a source close to the situation described that pricing as "inaccurate." Anmuth believes that Instagram, as well as auto-play video ads, could provide upside surprise to earnings estimates. "We continue to believe it is early in News Feed ads and Facebook can sustain strong growth rates through higher demand, pricing, and engagement, and importantly, proving better ROI to advertisers. Facebook shares currently trade at 29x our 2015E earnings, and slightly higher when factoring in acquisition dilution."

When it comes to Norwalk, Conn.-based Priceline, the online travel giant likely has the greatest valuation support, with a earnings multiple of just 18 times 2015 estimates. Shares are down 13% from their March 5 high, and are up just 2% year to date. "We continue to believe Priceline is the best-positioned company in the online travel space and will continue to gain share in international markets," Anmuth wrote in the note. "We look for strong International bookings growth throughout 2014 (+34%), driven by, Agoda, and, along with a more stable European macro environment."

Anmuth rates Priceline shares "overweight" as well.

Driving Priceline's strength is, which now has over 425,000 hotel and other accommodation listings, according to the company's fourth-quarter earnings. With the company's 2012 acquisition of Kayak and continued investment in mobile, Anmuth believes there is more room to run, particularly in Europe, where Priceline is the dominant hotel marketplace.

"We believe there is still meaningful room for European hotel share gains of total European hotel nights, and we look for greater contribution from high-growth opportunities in LatAm and APAC," Anmuth penned in the research report. "We do not believe there is a strong bear case here, with concerns being that Priceline has been well-owned and that the company could increase investments and bring margins down. However, as we saw a year ago, we are comfortable with that trade-off as Priceline has shown strong returns in International growth through increased investment."

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
FB $119.49 1.40%
PCLN $1,250.95 0.81%
AAPL $92.69 -0.59%
GOOG $711.11 1.40%
TSLA $214.84 1.60%


Chart of I:DJI
DOW 17,740.63 +79.92 0.45%
S&P 500 2,057.14 +6.51 0.32%
NASDAQ 4,736.1550 +19.0610 0.40%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs