Credit Suisse loves these tech stocks, says 3 have upside of more than 130%

Published Mon, Apr 25 202211:25 PM EDT

Credit Suisse has named a raft of tech stocks it believes will outperform, saying all of them have more than 40% potential upside. The bank's analyst Stephen Ju named stocks including Alphabet , Amazon , Meta and gaming supplier Unity Software and said his picks are set to do well as digital ad spend goes up, retail dollars shift online and gaming audiences boom. Tech has had a turbulent time this year, with the tech-heavy Nasdaq Composite down 17% year-to-date. Investors are watching closely as the major tech firms report first-quarter earnings this week, in an environment of high inflation and rising interest rates. One of the bank's outperform-rated stocks, Snap , is described as "a scarce asset which offers advertisers access to a coveted younger demographic," and the bank noted its continued moves into augmented reality. Snapchat already offers users AR for shopping, creating video and adding photo filters and last year announced a $500 million deal to buy hardware firm WaveOptics . The bank has a price target of $88 on Snap, which closed at around $30 on Apr. 22, representing a potential upside of 196%. The company had a "challenging" first quarter , according to CEO Evan Spiegel, missing analysts' expectations for sales and profit, but grew daily user numbers more than expected. Read more Earnings playbook: Your guide to the busiest week of the reporting season, featuring Apple & others CNBC Pro Talks: Investor Sarat Sethi shares long-term stock picks, talks 'growth at a reasonable price' These stocks have the most upside and solid momentum heading into earnings, analysts say Mobile gaming company AppLovin is another potential high performer, according to Credit Suisse. The firm, which debuted on the Nasdaq a year ago , is a pick because it operates in smartphones — with mobile the fastest-growing gaming segment. Credit Suisse expects the audience for gaming to expand from less than 200 million people playing via consoles to more than 6 billion via connected screens. The bank did not give a timescale for its estimates. The bank has a price target of $112 on AppLovin stock, which closed at around $41 on Apr. 22, representing a potential upside of 172%. Unity Software, which makes technology for gaming and other companies, is set to do well from demand for 3D modeling from online retailers, Credit Suisse said. It is rated outperform for its "material" expansion of the total addressable market beyond games. The bank has a price target of $180 on Unity stock, which closed at around $76 on Apr. 22, representing a potential upside of 138%. Amazon, Alphabet and Meta Amazon, which reports first-quarter results Thursday, is also rated outperform, with the bank liking its potential for increased operating margins in e-commerce "as Amazon grows into its larger infrastructure," as well as its "upward bias" to cloud provider Amazon Web Services. Revenue at AWS rose nearly 40% year-over-year in the last quarter. The bank has a price target of $4,100 on the stock, which closed at around $2,887 on Apr. 22, representing a potential upside of 42%. Outperform-rated Alphabet, which reports first-quarter results Tuesday, is likely to benefit from small to medium-sized businesses using its automation tools to place ads, Credit Suisse said. The bank expects online advertising to become a $3.2 trillion market in the long term, driven by additional ad dollars from SMBs, and estimates the penetration rate for online ads is only around 15% today. Credit Suisse has a price target of $3,450 on Alphabet stock, which closed at around $2,393 on Apr. 22, representing a potential upside of 44%. Meta, formerly Facebook, which reports on Wednesday, is also outperform-rated by the bank. It likes its ability to increase revenues without upping ad loads – the volume of advertising available on its platforms. "Street models are too conservative and underestimate the long-term monetization potential of upcoming new products," Credit Suisse added. The bank has a price target of $272 on the stock, which closed at around $184 on Apr. 22, representing a potential upside of 47.7%. - CNBC's Todd Haselton, Annie Palmer, Kif Leswing contributed to this report.

The logo of Swiss bank Credit Suisse is seen at its headquarters in Zurich, Switzerland March 24, 2021.

Arnd Wiegmann | Reuters

Credit Suisse has named a raft of tech stocks it believes will outperform, saying all of them have more than 40% potential upside.