Meta, Amazon are investors’ favorite mega-cap stocks: JPMorgan survey

Yahoo Finance Live anchors Dave Briggs and Seana Smith discuss a new survey from JPMorgan that found which mega-cap stocks are the top picks among investors in 2023.

Video Transcript

SEANA SMITH: Let's get to another story that we are watching-- a new investor survey out from JPMorgan saying that investors think US internet stocks are going to outperform the S&P 500 this year. And that's not all-- get this, the favorites among them, Meta and Amazon. Now, both of these stocks were down significantly over the last year-- Meta falling just over 60%, Amazon down about 45%.

But investors finding some tailwinds for both of these names, and, more broadly, the sector setting attractive valuations, easing comps, improved margins. Dave, it caught me by surprise that Meta, 41% of investors think Meta is going to be a top performer. I think the only way you can justify that is strictly on a valuation basis.

Because when you take a look at Meta, nothing really has come out from the company in terms of the fact that they would be changing or pivoting their strategy going forward-- lots of blowback, lots of criticism on the company's focus on the Metaverse, saying that that is way too soon, they shouldn't be putting all their eggs in one basket at this point. And I don't see that changing.

And you also have higher interest rates. It's hard for me to kind of wrap my head around the case that Meta is going to be the top performer here.

DAVE BRIGGS: I hate to continue to agree with you on these subjects, but my immediate reaction was, huh? Meta? Now, they are suggesting that it's the ad environment that will be favorable to them, but that has been a very tough environment going back several months. It looks to get a lot more difficult, if anything, in the year ahead based on digital ads and what we're seeing.

And if you wanted to bet on anyone in that space, it's probably Google slash Alphabet in that sector. In terms of sectors that they think will do well, these investors, they believe e-commerce is the best sector to invest in, which does give you some guidance why they pick Amazon there. We really just don't have a lot of insight why these investors feel it's Meta, because, certainly, there's no suggestion that the metaverse is going to have a strong '23.

If anything, it's five, if not 10 years away, from success if it ever finds it. Amazon you can see because lost more than half its market value last year, and you have to bet on Amazon in the long run as they continue to bring their claws into everything we do. And e-commerce is going to come back, still largely an AWS story for Amazon.

I can't figure out why it is you'd want to bet on Meta. Now, I think, largely, this is compared to what they think the S&P is going to do, which these investors think it's going to be, quote, "flattish." So if you think that the S&P is flat, maybe Meta and Amazon are going to come back plus-5%, plus-10%, and therefore making them a win.

I was surprised also to see those very investors that bet on Meta bet against Netflix in the year ahead, because a lot of analysts in the last couple of days have been very bullish on Netflix.

SEANA SMITH: Yeah, they certainly have been. A lot of that tied to their new ad tier-- they're very bullish. They think that is going to be enough to kind of attract new consumers and really up the usage that we're seeing in Netflix, which has really struggled in order to gain users and really have struggled to post substantial user growth in recent quarters and in recent years.

We will see-- I was very surprised by the fact that 43% of these investors think Netflix is going to be the worst performer of those mega caps. But we shall see.