Which Internet Software Stocks Is JP Morgan Bullish On?

JP Morgan analyst Cory Carpenter named Take-Two Interactive Software TTWO and Xometry XMTR as top picks within the internet small and mid-cap (SMID) and video games sectors.

As part of a wider reassessment of the internet SMID and video games sectors, this modification by JP Morgan encapsulates their latest industry analysis and projections.

The key conclusion of this assessment is that small-cap internet stocks continue to underperform significantly, marking the fifth consecutive year of this trend.

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Despite this, the sector shows some resilience with the median covered company projected to grow revenue by 9% and maintain a 20% EBITDA margin in 2025, with all companies now adjusted EBITDA profitable, the analyst observed in the report.

A notable finding is the potential positive impact of the App Store ruling on companies like Match Group MTCH and Bumble BMBL, which may result in some fee relief.

While overall estimates for 2025 have seen slight downward revisions, the report highlights specific opportunities and dislocations, such as Take-Two Interactive as a top pick due to the anticipated GTA VI release, and identifies Roku, Inc. ROKU and Xometry as companies with stock dislocations worth watching.

Carpenter maintained an Overweight rating on Take-Two Interactive with a price forecast of $250 due to the highly anticipated GTA VI (May 2026), its status as the most anticipated video game release in history, and strong performance from NBA 2K and Zynga. While GTA VI delays pose a risk, the firm projects significant growth with $8.75 billion in bookings and $9 adjusted EPS in FY27, driven by GTA VI unit sales.

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The analyst has rated Xometry Overweight with a $38 price forecast, calling it a top small-cap pick. The custom manufacturing marketplace is seen as a clear leader in a growing online market, with accelerating revenue. Despite risks like manufacturing contraction, Xometry is projected for $595 million in marketplace revenue and $13 million adjusted EBITDA in 2025. Tariffs, supply chain uncertainty, and onshoring should accelerate share gains, as per the analyst. He increased the price forecast from $36 to $38.

Carpenter also increased the price forecast for Roblox Corp. RBLX (from $80 to $100), citing beat and raise first-quarter and strong second-quarter intra-quarter trends.

The analyst raised the price forecast on Roku, Inc. from $75 to $85, citing China tariff relief and platform revenue upside potential.

He boosted the price forecast on Applovin Corp. APP from $355 to $400, citing a first-quarter beat, app store ruling, and self-serve catalyst.

Carpenter downgraded Bumble from Neutral to Underweight, maintaining a $5 price forecast, despite the stock’s recent 50%+ surge since Liberation Day.

The upgrade in profit, driven by cost cuts, offset weaker revenue. However, Carpenter anticipates accelerated declines in revenue and payers, citing worsening U.S. download trends.

He expects margins to moderate as brand marketing resumes (i.e., another big upgrade seems unlikely) and notes continued challenges in the online dating sector, especially with Gen Z engagement. Tinder’s turnaround is further along, yet Match Group shares are near all-time lows, reflecting industry-wide struggles.

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