JP Morgan analyst: Google, Priceline hot, Amazon not
Politicians may not be willing to say it, but analysts will. A handful of those at JP Morgan offered their picks for the media and tech stocks best positioned to weather the recession that they all seem to feel is upon us.
They had little good to say about the print industry (imagine that!), recommending against magazines and newspapers as categories. Of the newspapers, E.W. Scripps has the brightest prospects, they said. Why? Because of the major newspaper companies, its business lines are the least tied to the musty print product.
Looking at tech stocks, Imran Khan singled out Google and Priceline as two that he feels are undervalued, and bucked the trend among the Street in recommending against Amazon.
"The whole Yahoo-Microsoft thing will just help Google gain market share, whatever the outcome," Khan said.
By Khan's analysis, each percentage point that Google gains in the search market translates to an additional $200 million in annual revenue.
Khan said that the lawyers he had talked with suggested that the [concerns](/government/article.php/3754191/Clock+Ticking+on+YahooGoogle+Ad+Pact.htm) about the Department of Justice fouling up the [ad deal](/bus-news/article.php/3753001) with Yahoo were not too serious.
Conventional wisdom argues against investing in travel stocks when economic times are tough, but Khan said that Priceline was better poised than Expedia and the others to make a go of it, and even flourish in the coming months. Khan expects Priceline to enjoy exuberant growth in the European market, likening the company's position there to the how the online travel industry in general was situated in the United States in 2001. Just as online travel as a category took off at a time of economic turndown, Khan looks for a similar phenomenon in continental Europe, with Priceline as the principal beneficiary.
On Amazon, which has generally enjoyed analysts' favor for its continued innovation and sustained financial health, Khan took the road less traveled. In three of the four quarters last year, Amazon's gross profit margin was down on a year-to-year basis. Facing increasing pricing competition from Barnes and Noble, Amazon could get squeezed on its book, music and video lines, which remain its most profitable business.
"Nobody seems to think that the recession is going to affect Amazon," Khan said, but insisted that it is "one Internet stock to avoid."