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In a note to clients on Thursday, Mizuho Securities analyst said Meta Platforms Inc (NASDAQ:META) and Uber (NYSE:UBER) are the firm’s top U.S. internet picks in 2023.
During the year, Mizuho expects macro trends to remain key drivers for U.S. and China internet stocks, with the divergence between the two expected to widen.
In addition, in the U.S., the firm anticipates that high inflation and rising interest rates will likely lead to a deceleration in GDP growth.
The analysts currently have a Buy rating on both stocks, with a $170 price target for Meta and a $46 price target for Uber.
On Meta, they wrote that the firm expects limited downside risk to FY23E consensus, with relatively easy revenue comps, and opex guidance already reflected in Street expectation.
“Advertising volume has been accelerating, a positive for pricing. The company’s record of overstating expense guidance should provide potential for upside in profitability. We believe additional government oversight or regulation of TikTok could benefit Meta’s Reels by weakening a significant competitor, which could improve investor sentiment,” they added.
For Uber, the Mizuho analysts believe unit economics are favorable for U.S. ridesharing. The analysts explained this is due to lower driver incentives and customer acquisition costs, the two largest components of expenses.
“Uber is the category leader, and positioned to gain share on more rational competition, in our view. Uber has been aggressively reducing fixed costs and is managing its business to optimize EBITDA, which provides support to FY23E EBITDA consensus. The stock is trading at a discount to peers in our SOTP valuation,” they continued.
