(Bloomberg) -- Meta Platforms Inc. is expected to be the top-performing megacap internet stock this year, according to a JPMorgan survey of investors, suggesting a rebound for the Facebook parent after its worst year on record.
According to the survey, 41% of respondents named Meta as the company they expect will perform the best this year, followed by Amazon.com Inc. at 36%, though e-commerce is expected to be the best-performing subsector. Streaming-video company Netflix Inc. is expected to be the worst-performing megacap.
Shares of Meta are up 0.7% as of 10:10 a.m. New York time Tuesday, while Amazon and Netflix gained 1.8% and 1.5%, respectively.
All three companies are coming off sizable drops; Meta fell 64% in 2022, making it one of the 10 worst performers among components of the S&P 500 Index, which itself fell 19%. Amazon fell 50% in its biggest one-year drop since 2000 and Netflix fell 51%, though it is up nearly 90% off a June low.
The group saw widespread pressure as the Federal Reserve aggressively raised interest rates to combat inflation, weighing on the multiples of so-called growth companies, while also raising the prospect of a recession. Meta saw outsized weakness as it struggled with a changed privacy policy at Apple Inc., which diminished its ability to sell targeted ads on iPhones. Investors also questioned Meta’s controversial plan to invest heavily in the metaverse.
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Following last year’s selloff, “respondents to our buyside survey expect the US Internet sector to slightly outperform the S&P 500 this year,” wrote JPMorgan analyst Doug Anmuth. Per the survey, 43% of respondents expect market-cap weighted internet stocks to be up more than 5% this year, while 30% expect it to be flat. To compare, 30% of respondents expect the S&P 500 to be up more than 5% in 2023, while 45% expect flat returns.
The JPMorgan survey shows investors see three primary tailwinds for the internet sector, including attractive valuations, easing year-over-year comparisons, and improved cash flows and margins. The respondents cited macroeconomic concerns — including rates and inflation — as the biggest expected headwinds, along with a deceleration in revenue and growth.
Beyond the market’s biggest companies, the survey indicates investors expect Match Group Inc., the parent company of dating app Tinder, to be the best-performing mid-cap internet stock this year, and for apparel retailer Farfetch Ltd. to be the top small-cap. Twenty-four percent of respondents named Farfetch, which JPMorgan wrote was “higher than we expected.”