Barron’s Says to Buy Amazon, Alphabet, and Facebook Now

barrons-logoRespected investment magazine Barron’s published a research article today outlining their bullish case for, Inc. (NASDAQ:AMZN), Alphabet Inc (NASDAQ:GOOGL), and Facebook Inc (NASDAQ:FB). But is Barron’s simply slamming the barn door after the horses have already run?

Lest you think these stocks are already expensive, Barron’s calls attention to the fact (subscription required) that their valuations are actually justified:

[The] gains aren’t extraordinary this year, they are merely better than average, and while valuations have gone up slightly in the case of Amazon, they have basically stayed the same for Alphabet (GOOGL) and actually declined for Facebook (FB). These three names are seeing price appreciation because they dominate their respective businesses. They have challenges that may slow their amazing growth, but nothing to make one refrain from owning the best-managed assets in tech.


Facebook trades at 32 times the $3.86 per share estimated for this year, and 25 times the $4.94 per share estimated for next year, down from 37 times and 28 times, respectively, the materially lower estimates that existed back in December when the stock was at $104.66.

Alphabet trades for 23 times the $34.13 per share estimated for this year and roughly 20 times the $40.42 estimated for next year, about the same as it was back on Dec. 31, with similar estimates at the time.

Amazon trades for 69 times this year’s estimate for $10.93 per share in adjusted, non-GAAP earnings, and 48 times the $15.97 estimated for next year, up from 68 times and 45 times the materially lower estimates that existed back in December. (Mind you, on a GAAP basis, the current multiple is actually a wrenching 130 times this year.)

So the bullish case boils down to 1) the companies’ dominance in the respective industries, and 2) valuations that aren’t as sky-high as one might think.

That all sounds good on the surface, and no one can doubt that FB, AMZN, and GOOGL are firing on all cylinders right now. It’s just that from an ownership standpoint, so much money is already in these names that the timing might not be right.

Year-to-date, all three stocks have already posted solid gains (chart courtesy of Google Finance):


In other words, investors are probably better off waiting for a major pullback in one or more of these names before jumping in — assuming they don’t already own them.

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