NEW YORK (TheStreet) -- Looking to find opportunities in the tech sector as the market suffers another down day, with its fourth consecutive day of triple-digit losses?

"We are highlighting [Facebook (FB - Get Report) , Netflix (NFLX - Get Report) , and TubeMogul (TUBE) ] as the best pullback opportunities in the Internet sector," Oppenheimer analyst Jason Helfstein wrote in a note Monday morning.

"Over the past 14 trading days, the three stocks have declined 8%, 15%, and 22%, respectively, vs. -9% for the NASDAQ Internet Index, -7% for the S&P Media Index and -4% for the S&P 500," the note said. "Meanwhile, we see 27%, 19% and 83% upside to our price targets respectively. We also note that our estimates are generally above consensus for 2016. Last, we review the potential risks to each company below."

Here's what Oppenheimer had to say on each stock. Check out ratings from TheStreet Ratings for additional perspective on the stocks.

TheStreet Ratings uses a quantitative approach to rating over 4,300 stocks to predict return potential for the next year. The model is both objective, using elements such as volatility of past operating revenues, financial strength, and company cash flows, and subjective, including expected equities market returns, future interest rates, implied industry outlook and forecasted company earnings.

Buying an S&P 500 stock that TheStreet Ratings rated a "buy" yielded a 16.56% return in 2014 beating the S&P 500 Total Return Index by 304 basis points. Buying a Russell 2000 stock that TheStreet Ratings rated a "buy" yielded a 9.5% return in 2014, beating the Russell 2000 index, including dividends reinvested, by 460 basis points last year.

 

FB Chart FB data by YCharts

1. Facebook Inc. (FB - Get Report)
Market Cap: $244 billion
Year-to-date return: 10.3%

Oppenheimer Price Target: $110
Oppenheimer said: FB risks relate to slower U.S. usage, a possible delay in "experimental" budgets into Instagram, and currency risk. According to comScore, total US July minutes decelerated to +17% y/y vs. +20% in June and +21% in May. This was driven by slower mobile minutes, +31% y/y vs. +36% in June and +37% in May. However, FB maintained its 21% share of time on mobile Internet, suggesting decelerating industry-wide mobile usage. Meanwhile, near-term upside to earnings should be driven by performance-based advertisers' initial foray into Instagram, which could be delayed if macro concerns build, as experimental budgets tend to be most economically sensitive. Last, FB derived 51% of its revenue outside the US, suggesting currency headwinds from a stronger U.S. dollar.

TheStreet Rating: Buy, B
TheStreet Said: 
TheStreet Ratings team rates FACEBOOK INC as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

"We rate FACEBOOK INC (FB) a BUY. This is driven by multiple strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures, good cash flow from operations, expanding profit margins and solid stock price performance. We feel its strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth greatly exceeded the industry average of 6.8%. Since the same quarter one year prior, revenues rose by 38.9%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • FB's debt-to-equity ratio is very low at 0.00 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with this, the company maintains a quick ratio of 8.47, which clearly demonstrates the ability to cover short-term cash needs.
  • Net operating cash flow has increased to $1,880.00 million or 40.19% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 19.45%.
  • The gross profit margin for FACEBOOK INC is currently very high, coming in at 94.81%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 17.78% trails the industry average.
  • FACEBOOK INC's earnings per share declined by 16.7% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, FACEBOOK INC increased its bottom line by earning $1.10 versus $0.59 in the prior year. This year, the market expects an improvement in earnings ($2.07 versus $1.10).

 

NFLX Chart NFLX data by YCharts

2. Netflix Inc. (NFLX - Get Report)
Market Cap: $45.8 billion
Year-to-date return: 113%

Oppenheimer Price Target: $125
Oppenheimer said:
NFLX risks relate to currency and discount rates. In 2Q:15, NFLX generated 28% of its revenues outside the US, forecast to grow to 40% in 2016. Therefore, our estimates would be at risk from a stronger US dollar. We also believe that investors may demand higher returns from "terminal value" stocks, as our price target is based on 2020E EPS, discounted at 10% annually.

TheStreet Rating: Hold, C+
TheStreet Said: 
TheStreet Ratings team rates NETFLIX INC as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:

"We rate NETFLIX INC (NFLX) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its robust revenue growth, expanding profit margins and solid stock price performance. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, generally higher debt management risk and disappointing return on equity."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • NFLX's revenue growth trails the industry average of 33.4%. Since the same quarter one year prior, revenues rose by 22.7%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • The gross profit margin for NETFLIX INC is currently very high, coming in at 84.02%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 1.60% trails the industry average.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. When compared to other companies in the Internet & Catalog Retail industry and the overall market, NETFLIX INC's return on equity is below that of both the industry average and the S&P 500.

 

 


TUBE Chart TUBE data by YCharts

3. TubeMogul Inc. (TUBE)
Market Cap: $379 million
Year-to-date return: -53%

Oppenheimer Price Target: $19
Oppenheimer said:
TUBE risks relate to delayed spending into "programmatic ad platforms" and discount rates. 2Q revenues +58% y/y, faster than linear TV spending and online video, suggesting a shift into programmatic video. As this is a new way to buy online video, advertisers may slow experimental spending if they perceive risk to global macro growth. Investors may demand higher returns from terminal value stocks, as our PT is based on 10x 2020E EBITDA, discounted 12% annually.

TheStreet Rating: Sell, D
TheStreet Said: 
TheStreet Ratings team rates TUBEMOGUL INC as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:

"We rate TUBEMOGUL INC (TUBE) a SELL. This is driven by multiple weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its feeble growth in its earnings per share, deteriorating net income and weak operating cash flow."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • TUBEMOGUL INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. For the next year, the market is expecting a contraction of 325.0% in earnings (-$0.68 versus -$0.16).
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Software industry. The net income has significantly decreased by 164.0% when compared to the same quarter one year ago, falling from $2.08 million to -$1.33 million.
  • Net operating cash flow has significantly decreased to -$6.24 million or 202.68% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • Compared to other companies in the Software industry and the overall market, TUBEMOGUL INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for TUBEMOGUL INC is rather high; currently it is at 67.33%. Regardless of TUBE's high profit margin, it has managed to decrease from the same period last year.