Goldman Sachs has come out with 10 themes to watch in the Internet and Interactive entertainment space for the coming year – and it’s no surprise that many of the themes are getting their biggest exposure from some of the industry’s biggest players, including Alphabet (GOOG).) (GOOGL), Meta Platforms (NASDAQ:META) and Amazon.com (NASDAQ:AMZN).
The firm’s Eric Sheridan and team highlight several key arguments for investors first and foremost: what to expect as the “new normal” for post-COVID growth, and the extent to which management has been tightening investments to provide a sharper focus on reality. benefit of the article.
“We argue that investors will need to accept lower levels of normal growth given the entry benefits of the pandemic period as digitalization is accelerated, but that is strong (much more globally. [gross domestic product] (growth) remains in the coming years in many important stages,” analysts said.
In terms of profits, the mid-quarter announcements from many companies are a “promising first step,” but in many cases that’s just a reversal of big investments made in the past 6-18 months rather than incremental changes, they said. All companies, on the other hand, face short-term obstacles of uncertainty in the stability of interest rates and in the stability of consumer/business end demand.
Getting into specific themes, Goldman Sachs notes that it continues to see “blurring lines” between traditional advertising and e-commerce – including “increasing adoption of social commerce (via digital ad platforms) and retail media networks (via eCommerce and other online. marketplaces).” They are in a good position to make money with Google (GOOG) (GOOGL), Meta Platforms (META) and Pinterest (PINS), the group says, while recently Amazon.com (AMZN) launched a new social commerce with its video of Inspire’s short form/ image feed for product discovery.
If we talk about short form video, it is also an important topic as competitors compete with the rapid success of TikTok (BDNCE). Despite the huge increase in time spent, monetization is still in the “early stages.” Most exposed to that theme are Google and Meta, Goldman said.
Google and Meta, along with Pinterest ( PINS ) and Snap ( SNAP ), are also key to Goldman’s fifth theme: the rise of the creator economy. Tools, monetization and the role of the “influencer” meet “a new dynamic industry where the platforms that embrace this change find the time spent but very much need to share/separate the economic unit of that monetization method with the content creator.”
If we turn to the development of local e-commerce, analysts note that the era of COVID-19 makes activities such as food delivery, shipping from the store and online shopping/pickup in the store “normal” consumer behavior. Corporate investment in the space is likely to set up a few verticals — food delivery, convenience, grocery — that have the potential to expand into broader applications, and key players include DoorDash (DASH), Lyft (LYFT) and Uber. (NYSE:UBER) and Amazon.
After the continuous increase post-COVID, online travel is changing in two important ways, the group notes: taking more of the consumer’s wallet with each trip and gaining marketing power will be the main drivers for the increase in share, rapid growth and operating margin, and margin . Volatility is the main debate of the sector in 2023. Most exposed to that theme, Goldman says, are Airbnb ( ABNB ), Booking Holdings ( BKNG ), Expedia ( EXPE ) and Vacasa ( VCSA ).
The cloud computing conversation is shifting from cost/efficiency to “an important part of growing customers,” analysts say, though over time growth is still a national theme — and the key names revealed are Google ( GOOG ) ( GOOGL ) and Amazon Web Services (AMZN).
It was difficult in 2022 discussions about Internet stocks to move away from the concept of the “metaverse,” an advanced Internet space that combines virtual reality and other technologies for immersive experiences. “Among our broad scope, we are looking at gaming companies (Roblox (RBLX), Activision Blizzard (ATVI), Electronic Arts (EA), Take-Two (TTWO), Ubisoft (OTCPK:UBSFY)) and some digital advertising companies (Meta and -Snap) as the best of this category, both from a usage and investment perspective.”
One final theme of the space involves increased government focus and regulation on the business practices of major players, including Amazon, Google, Meta, DoorDash, Lyft and Uber.
“We see three potential trends,” Goldman analysts said. “(1) ‘headline noise’ if investigations, fines and new regulations increase; (2) the rising costs of complying with a range of global systems (especially in the area of data collection and consumer privacy); and (3) windfalls in any way. market consolidation or strategic M&A by players large (causing the industry to depend on in-house product R&D).”
To sum up, analysts see the most compelling risk/reward in a stable group of big names with similar names: “a well-founded and balanced market position, the ability to manage an improved margin trajectory in 2023 and beyond (regardless of the large background in 1H 2023), and a “wall of concern” which has come to the fore in the last six months”: Uber (UBER), Amazon.com (AMZN) and Meta Platforms (META).