As is the case every year, the major Wall Street firms we cover here at 24/7 Wall St. come out with a list of stocks that they feel will be the top performers for the coming year. Last year was a veritable train wreck compared to most years, with everything from the COVID-19 pandemic that has crippled the economy on and off and killed hundreds of thousands, to a roller-coaster stock market that dropped 35% in less than a month and has since rallied to all-time highs, and more. Nonetheless, Wall Street analysts are doing their jobs and the top picks are coming out fast.

With so much concern that valuations are very stretched, it makes sense for investors to consider thinning the momentum herd in portfolios and perhaps looking for growth ideas that are less crowded. In fact, many analysts are suggesting broad sector rotation. However, a new research report from the Jefferies internet team suggests staying with mega-cap leaders for 2021.

The following are the firm’s four top picks from the sector. One caveat investors should consider is that many big tech companies are coming under scrutiny, and some feel they could be targeted with antitrust legislation from Congress. Lastly, while all are rated Buy a Jefferies, it is important to remember that no single analyst report should be used as a sole basis for any buying or
selling decision.

Alphabet

The search giant continues to expand and is even working on a driverless car now. Alphabet Inc. (NASDAQ: GOOGL) is a global technology company focused on key areas such as search, advertising, operating systems and platforms, and enterprise and hardware products. The company generates revenue primarily by delivering online advertising and by selling apps and content on Google Play, as well as hardware products. Alphabet provides its products and services in more than 100 languages and in 190 countries, regions and territories.

The company offers performance and brand advertising services. It operates through Google and Other Bets segments. The Google segment includes principal internet products, such as search, ads, commerce, Maps, YouTube, Apps, Cloud, Android, Chrome and Google Play, as well as technical infrastructure and newer efforts, such as virtual reality.

The analysts point to Google Cloud, which is the largest cloud infrastructure play and engages in more technology, infrastructure research and development in headcount and dollars than any other company. That gives it the strength and wherewithal to compete with and differentiate itself from Amazon’s AWS and Microsoft’s Azure.

Alphabet reported stellar third-quarter earnings, but some on Wall Street feel that blowout advertising revenues sure will not help the company in its fight against antitrust allegations.

The Jefferies price target for the stock is $1,850. The Wall Street consensus target is $1,936.55. Alphabet stock closed most recently at $1,727.62 a share.

Amazon

This is the absolute leader in online shopping and remains a technology anchor on the US 1 list of top stock picks. Amazon.com Inc. (NASDAQ: AMZN) serves consumers through retail websites that primarily include merchandise and content purchased for resale from vendors and those offered by third-party sellers. It has one of the most valuable brands in the world.

The company serves developers and enterprises through Amazon Web Services, which provides computing, storage, database, analytics, applications and deployment services that enable virtually various businesses. AWS is also the undisputed leader in the cloud now, and many top analysts see the company expanding and moving up the enterprise information value chain and targeting a larger total addressable market.

Like every year, online sales continued to grow in 2020, especially during the busy Christmas shopping period, and as a result of the COVID-19 shutdowns, and Amazon remains the go-to portal for many shoppers.

Jefferies has a massive $4,000 price objective for the technology giant. The consensus estimate is $3,822.57, and last week’s final trade Amazon.com stock came in at $3,104.25.

The huge social media leader has been on a roll, and the analysts remain very positive. Facebook Inc. (NASDAQ: FB) is the largest social network, with over 2.3 billion monthly active users and over 1.6 billion daily active users. The company generates revenue from advertising and from payments, with over 95% of revenue from advertising. It generates close to 50% of revenues in the United States and Canada and is expanding rapidly in international markets.

The company’s solutions also include Instagram, a mobile application that enables people to take photos or videos, customize them with filter effects, and share them with friends and followers in a photo feed or send them directly to friends. Messenger, a messaging application for mobile and web on various platforms and devices, enables people to reach others instantly, as well as enable businesses to engage with customers. WhatsApp Messenger is a mobile messaging application.

The company has been under intense scrutiny lately, with some alleging there has been unreasonable censorship, and it is yet another that may be targeted by either Congress or the Department of Justice, or perhaps both. With that noted, it remains one of the largest and most powerful social media platforms in the world.

The $320 Jefferies target price compares with a $322.57 consensus target and the most recent close for Facebook stock at $251.36 per share.

Snap

This had an initial public offering almost four years ago, fell back to earth fast and has recovered in a big way. Snap Inc. (NYSE: SNAP) is a social media company consisting of leading social media platform Snapchat and hardware device Spectacles. Through Snapchat, the company facilitates communication through visual media, enabled by the mobile camera.

Users are able to share photos, videos and text and are exposed to publisher content from top media companies such as The Wall Street Journal, Vogue, People, MTV and CNN. Advertisers use the platform to promote products, which has a strong reach with the coveted millennial demographic.

Nearly four years after its rocky IPO, Snap and its social-media app Snapchat have found their path and then some. The stock is outperforming rival social-media companies like Facebook and Twitter, and many feel that the upcoming earnings could be very strong for the company.

Jefferies recently lifted the price target to $65 from $41. The consensus target is $46, and Snap stock was last seen at $50.31 a share.

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The Jefferies team is staying with the big boys. While a few of them may have some storm clouds forming, it is a pretty good bet that, one way or another, they all will find a way to resolve issues to the satisfaction of regulators, politicians and the rest.

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