Goldman's technology team names a clear top pick for the rest of 2023

Published Tue, Mar 7 20231:06 PM EST

Goldman Sachs has highlighted several opportunities for investors to play an uncertain environment now that the fourth quarter earnings season is over. Companies' financial results generated a collection of mixed narratives for internet companies, mainly around the macroeconomic environment and the state of consumer spending, as well as how management teams balance long-term growth objectives against market volatility. "We remain in an environment where investor interest in low/no GAAP profitable companies and/or companies with low stock trading liquidity or market capitalization remains depressed," Goldman Sachs' internet analyst Eric Sheridan said in a note Monday. "In our investor conversations over the past 2 months, many investors continue to see a probability of a regional/global consumer slowdown in the next 6-9 months… and remain in a defensive posture with respect to the sector." With that in mind, Goldman highlighted Amazon as its top pick for the remainder of the year, among several other large cap, buy-rated stocks. "Looking at our stock coverage's risk/reward skew exiting Q4 large cap earnings, we see the most compelling risk/reward setups in the group among a collection of names with a mixture of traits including stable/improving revenue trends, ability to manage for improved margin trajectory (in various economic outcomes), and investor 'wall of worry' at the center of any key debates," Sheridan said. Here are some of Goldman's other tech picks: The firm has a $145 price target on Amazon, which implies upside of about 54% from Monday's closing price. Goldman said it sees a "multi-year operating income margin expansion story" for Amazon. That expansion would come on the back of improved e-commerce margins, fewer International losses and "higher profit margin mix contribution" from its cloud and advertising businesses. In gaming, Goldman names Take-Two Interactive its top pick. Macroeconomic conditions are a short-term headwind, but the gaming industry has a positive backdrop emerging in the medium- to long-term, the note said. Sheridan pointed to signs of stability in mobile activity following a year of Apple privacy challenges. He also noted that content IP slates continue to push out launches, and the outperformance of more scaled games in December despite a weaker spending environment. Goldman has a $155 price target on Take-Two, which is almost 34% above where it closed Monday. In digital advertising, Goldman expects more favorable risk/reward in the short term for Meta Platforms "in a dual element of rising business momentum and intense focus on efficiencies." Alphabet's price will be volatile in the near term, but the stock is "among the very best companies positioned for future computing cycles tied to AI/ML, augmented reality & quantum computing," Sheridan said. He also highlighted Uber , Etsy , Expedia , Lyft , Match and Bumble .