The Next 5 Years For Consumer Internet Stocks Could Be 'The Golden Years' For Mobile

In the years ahead, some of the most dominant names in internet technology could extend their lead over the competition.

According to Barclays analyst Ross Sandler, the next big trends in the space, such as augmented and virtual reality, Internet of Things (IoT), public cloud and machine learning, are just getting started.

“For better or worse, the largest, most well-resourced companies in the space are extending their competitive advantage vs. smaller peers,” Sandler explains.

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In the e-commerce space, Barclays is bullish on Amazon.com, Inc. AMZN, eBay Inc EBAY and Latin American platform Mercadolibre Inc MELI. Barclays has an Overweight rating on eBay, despite the fact that only 37 percent of the other analysts on Wall Street that cover the stock have Buy ratings on the name.

In advertising and mobile, Barclays is bullish on Alphabet Inc GOOGL and Facebook Inc FB. The firm is Underweight Twitter Inc TWTR, but Sandler says the shift of unsold ad inventory to programmatic could generate upside for the stock in the second half of the year.

When it comes to the web tools business, Barclays’ top picks are Godaddy Inc GDDY and Wix.com Ltd WIX. Sandler projects free cash flow growth of 20 percent from Godaddy over the next several years.

Finally, in China, Barclay’s top internet stock picks are TENCENT HLDGS LTD UNSP ADR EACH REP 1 ORD TCEHY, Alibaba Group Holding Ltd BABA and Weibo Corp (ADR) WB. Sandler notes that Alibaba’s gross merchandise volume (GMV) is expected to reach $1 trillion by 2020, exceeding the GDPs of all but the top 16 nations in the world.

Disclosure: the author is long BABA.