Goldman Sachs, in a research note to investors, turned its focus to 2025 and discussed industry themes for U.S. Internet companies. The firm told investors in a research note that several themes center around the rise of AI, its potential to change consumer and enterprise computing habits, and the need for investments. The firm continues continues to believe that the impact of AI is currently most pronounced for Cloud service providers and digital advertising platforms, and called out Uber (UBER) as its top pick heading into 2025.
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UBER: Uber is the firm’s top pick for 2025 among its Large Cap coverage. Goldman sees a company that can continue to deliver on its February 2024 Investor Day commitments despite the rise of autonomous vehicles and believes Uber can produce north of $3.50 of GAAP EPS in 2026 against a $62 stock price. The firm sees 55% upside to its $96 12-month price target, making it the most compelling risk/reward skew of its Large Cap names from current levels.
INTERNET INDUSTRY: Despite debates around post-pandemic normalization and the potential for a consumer slowdown in recent years, Goldman sees the U.S. Internet industry entering 2025 on strong footing in terms of end demand trends and ability to balance growth initiatives, profit margins and capital returns. At the same time, a lot of those forward narratives are already being priced into equities, creating a more limited scope for outsized absolute returns and more narrow risk/reward skews than has been seen since the tail end of the prior bull market, Goldman argues. The firm sees the most compelling risk/reward in companies that have lagged a robust market environment.
Goldman noted that it is Buy-rated on Alphabet (GOOGL), Amazon (AMZN), Spotify (SPOT), and Meta (META), is Neutral-rated on DoorDash (DASH), Booking (BKNG), Netflix (NFLX), and AppLovin (APP), and is Sell-rated on AirBnb (ABNB). The firm highlighted outsized risk/reward Buy-rated opportunities in Pinterest (PINS), Chewy (CHWY), DraftKings (DKNG), and Match (MTCH) over the next 12 months.
MORE THEMES FOR 2025: Goldman sees the near-term focus for 2025 likely being centered around the ability of Cloud computing companies to show broadly stable revenue trends and trying to gain a better understanding of how building momentum in AI workloads and AI-related services could contribute to growth and margins going forward. Amazon and Alphabet are the most exposed, the firm said. The firm continue to see a blurring of lines between traditional advertising and eCommerce business models over the past several years, including the rise of social commerce adoption by digital ad platforms and advertising, with Amazon, Google, Meta, Pinterest, DoorDash, Uber, Instacart (CART), Lyft (LYFT), and Ibotta (IBTA) the most exposed. Most exposed to the shift in advertiser priority within digital channels toward direct response and bottom-of-funnel objectives are Google, Meta, Amazon, Pinterest, Reddit (RDDT), AppLovin, Snap, DoubleVerify (DV), Yelp (YELP), and Ibotta, while Uber, Lyft, and Alphabet are most exposed to the rise of autonomous vehicles and the pathway for mobility networks, Goldman said.