Why There Are Better Internet Stocks Than Twitter And Yelp

• Susquehanna Group is bullish on GrubHub Inc GRUB and LinkedIn Corp LNKD ahead of earnings.
• The firm has a Neutral outlook for Twitter Inc TWTR and Yelp Inc YELP.
• All four companies report earnings this week.

Four big-name tech stocks are reporting earnings this week, and Susquehanna Group analyst Shyam Patil believes that two of the stocks make for good buys ahead of earnings. In a new report, Patil discusses the outlook for GrubHub, LinkedIn, Twitter and Yelp and names Susquehanna’s top picks of the four.

Grubhub
Patil believes that GrubHub will report solid earnings numbers and is bullish on the stock. Susquehanna sees the company as well-positioned to capitalize on the massive shift of the $70 billion takeout market from offline to online. The firm also expects that margins will expand over time.

Twitter
Patil believes that Twitter’s pre-announcement that earnings will fall on the high end of its guidance range means that earnings will likely be in-line with consensus estimates, but Susquehanna is Neutral on the stock. While monetization has been a bright spot for Twitter, Patil points out that user growth and engagement are the bigger concerns. Management provided no update on either of these metrics during the pre-announcement, ad Susquehanna believes that visibility will continue to be low looking ahead.

Yelp
Patil believes that Yelp’s issues with employee retention and sales force hiring has clouded its near-term growth outlook, and Susquehanna rates the stock Neutral. However, the firm believes that solid growth should return for Yelp once the company has solidified its sales force. In addition, Patil praises Yelp’s positioning in the local ad market.

LinkedIn
Patil sees several long-term revenue and margin expansion drivers for LinkedIn. Patil predicts that Sales Navigator could be the next $1 billion-plus business opportunity. In addition, Susquehanna sees strong growth ahead in Sponsored Updates and Bizo and believes that the penetration of Talent Solutions is still relatively low as well. The firm is bullish on the stock ahead of earnings.

Disclosure: the author holds no position in the stocks mentioned.