© Reuters. Alphabet, Meta Platforms in recession, Amazon, Uber, Airbnb for risk – BofA
By Sam Boughedda
In a research note on Thursday, BofA analysts told investors that Alphabet (NASDAQ:) and Meta Platforms Inc (NASDAQ:) are stocks to hold in a medium-to-severe recession scenario, while they also have chose Amazon (NASDAQ:), Uber (NYSE:), and Airbnb Inc. (NASDAQ:) as stocks for a risky trade.
In the note, focusing on 2023 and the risk of recession, they explained that following the Fed’s recent 50 basis points, BofA economists remain cautious about the US economy and continue to expect to a mild recession from 1Q23 with negative US GDP for 2023.
Further, the analysts said: “BofA strategists favor quality, income and small caps over growth stocks through 2023. These views are conservative for our internet coverage group, although stocks are down. 52% on average year-to-date (vs. 17%), and valuations relative to historical (sales, EBITDA, PE) suggest that the sector could already discount more downside estimates.”
In moderate to severe condition recession scenario, Alphabet and meta are the companies named by analysts, who said “these stocks have more valuation support than history.”
“While reductions in revenue estimates for advertising stocks are very likely in a recessionary scenario, we expect cost-cutting activity to accelerate in 2023 to drive lower EPS reductions relative to peers. Looking back to the 2008-2009 recession, Alphabet’s revenue growth slowed to 5% in 2Q 2009, however, operating expenses fell year-over-year, EBITDA margins increased 5 points year-over-year and EPS increased 16%. Meta recently announced a major layoff and appears more likely to cut expenses now compared to early 2022,” they said. .
In a risk environment, which they don’t expect in the first half of 2023, they said, “For potential risk on the trade, we prefer stock gainers with perceived margin leverage, which has outperformed after the November 2008 industry low. For a trade at risk, our top share gainers include: 1) Amazon will gain e-commerce share and increase margins following a massive investment in fulfillment, 2) Uber is increasing its share in mobility and see improved margins through greater network efficiency, and 3) Airbnb will experience the strongest multi-year travel growth with high gross margins, which will leverage travel expenses. exploitation.”
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