Tech stocks rise and JP Morgan likes Amazon and Uber Best

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Tech stocks looked set to rise for a second day on Tuesday as big internet names advanced evenly in premarket trading.

Despite the broader comeback, futures on the tech-heavy Nasdaq rose more than 2%. JP Morgan analysts clearly have their favorites –

Amazon.co.uk

(symbol: AMZN) and

Uber

(UBER).

The bank’s equity research team is overweight both stocks, as well as the owner of Google

Alphabet

(GOOGL). It has neutral notes on

Meta

(MTA) and

netflix

(NFLX), and is underweight on

Instantaneous

(SNAP) and

pinterest

(PINS).

Amazon remains the team’s best idea in the internet business, analysts said in a note on Tuesday, citing expectations of accelerating year-over-year revenue, expanding margins and moderating spending. investment to lead to “a significant inflection in free cash flow” in 2023.

JP Morgan noted that while it may be a top pick among many, investor discussions revealed growing caution, particularly when it comes to retail. But analysts, led by Doug Anmuth, were less worried.

“The concern over retail turnover is primarily driven by the macro and how AMZN will hold up in a recessionary environment. We continue to believe that higher inventory levels and faster delivery speeds will be primary drivers of Prime’s return to normal,” analysts said. In the near term, Amazon is also expected to benefit from lower freight and fuel costs compared to the first half of the year, and has the advantage on omnichannel retailers this holiday season, which may be limited by physical space, JP Morgan added.

While currency exchange rates, including the strong dollar, will weigh on growth and profitability, the company’s AWS (Amazon Web Services) business is better hedged than others, analysts added, with product costs in local currency and revenues mainly in US dollars.

Shares of Amazon rose nearly 3% in premarket trading, after climbing 2.6% on Monday. The stock has fallen more than 30% in 2022.

Analysts also like Uber, as well as

Lyft

(LYFT), despite the fact that the duo, with

DoorDash

(DASH) have been “disappointing stocks,” with investor talk centered on what could move them forward.

“Uber is our next favorite name as we seek continued ride recovery and greater operational discipline to generate $1.5 billion in EBITDA this year, on track to meet the company’s 2024 goals,” analysts added.

They said macroeconomic concerns were “an overhang” on Uber,

Lyft

and

DoorDash
,

but added “we believe ridesharing continues to recover and should be less discretionary in nature than food delivery.” Shares of Uber climbed 3.3% in the premarket session, while Lyft and DoorDash were also up around 3%.

Netflix is ​​the most talked about name among investors, following analyst calls and meetings, given the company’s upcoming advertising launch. But the team didn’t quite share the excitement and disputed the idea that the ad subscription wasn’t priced yet.

“We understand the excitement and optimism around Netflix’s new initiatives, even though it’s a response to slowing core growth. But we think the idea that they’re not in numbers or shares at least somewhat, is incorrect, especially since Netflix spent most of the period between Q1 and Q2 earnings in below $200,” JP Morgan said.

Netflix stock soared 2.1% to $239.04 ahead of Tuesday’s open. It fell 60% in 2022 as of Monday’s close.

Write to Callum Keown at callum.keown@dowjones.com