Citigroup recently released a Q1 outlook report for North America's Internet Industry stocks, adjusting the earnings expectations and Target Prices for most companies covered in the sector.
According to Zhito Finance APP, Citi recently released a forecast report on North America's Internet Industry Stocks for Q1, adjusting the earnings expectations and Target Prices for most companies under its coverage to reflect expectations for the impact of tariffs and the resulting softening macro environment.
Although all companies covered by the bank are affected to some extent, overall, the bank believes that the digital advertising and E-Commerce industries are the most impacted, while website builders, tools providers for small and medium enterprises, and online dating fields are less affected.
Citi expects that the first quarter Earnings Reports may not attract much attention from investors, while the outlook and expectations for the second quarter and the entire year of 2025 will primarily be driven by tariffs and macro factors. The bank will also focus on key fundamental factors within its coverage, especially as tariff headwinds begin to ease.
The bank still considers VeriSign (VRSN.US), Wix.com (WIX.US), GoDaddy (GDDY.US), eBay (EBAY.US), and Criteo (CRTO.US) to be more defensive with strong fundamentals, believing that Wix.com’s valuation is particularly attractive. Furthermore, the bank thinks that Wayfair (W.US), The Trade Desk (TTD.US), Etsy (ETSY.US), and BARK Inc. (BARK.US) will be significantly affected by tariffs.
Online Advertising: The Trade Desk, Criteo, IAC (IAC.US), Ziff Davis (ZD.US), Outbrain (OB.US)
Due to uncertainties in the macro environment and the expectation that advertisers affected by tariffs will reduce spending, particularly in the latter half of the year, the bank has lowered its advertising revenue forecast for the online advertising sector. The results of the survey vary, but signs of market weakness have been observed. While advertisers may act cautiously to avoid overreacting, if the trend continues to deteriorate, advertising budgets will decrease accordingly.
The bank's expected adjustments somewhat reference the economic slowdown caused by the pandemic lockdown in the second quarter of 2020, but this time the reduction is relatively small, especially considering the repeated changes in tariff policies. The bank believes that The Trade Desk is most directly affected by tariffs, while Criteo's performance-based advertising expenditures have a certain degree of defensiveness.
The bank believes that The Trade Desk is affected by brand advertising and certain verticals, with the revenue forecast for fiscal year 2025 expected to drop from $2.879 billion to $2.755 billion, and the target price revised from $70 to $63; Criteo, despite its performance advertising advantages, is impacted by retail media and tourism-related verticals, with its revenue forecast for fiscal year 2025 lowered from $1.168 billion to $1.147 billion, and the target price decreased from $60 to $47.
In addition, the bank has lowered the target price for IAC from $47.55 to $45, for ZiffDavis from $52 to $35, and for Outbrain from $5.9 to $4.
E-Commerce: eBay, Etsy, Wayfair
Due to potential tariff impacts and a decline in Consumer confidence, which is currently close to historical lows, the bank has downgraded its forecasts for discretionary Consumer E-Commerce companies. For years, expenditures in this segment have been weak and there is a risk of further deterioration, especially as the Real Estate market weakens again, affecting Real Estate-related expenditures. The bank believes Wayfair and Etsy are most affected in this regard, while eBay remains the most defensive, although there are debates among many investors.
The bank believes eBay is relatively less affected by tariffs, with the GMV forecast for fiscal year 2025 dropping from $75.923 billion to $75.436 billion, and the target price revised from $80 to $79; Etsy is impacted by tariffs and pressure on Consumer discretionary spending, with its GMS forecast for fiscal year 2025 lowered from $12.115 billion to $11.749 billion, and the target price reduced from $53 to $48; Wayfair faces significant tariff impacts, with revenue forecast for fiscal year 2025 dropping from $11.83 billion to $11.464 billion, and the target price slightly increasing from $28 to $30.
Website Builders: GoDaddy, Wix.com
The bank believes that due to tariffs and broader economic slowdowns, small and medium-sized enterprises may face potential pressure, but the service business of website builders and their counter-cyclical properties give them certain advantages. Small and medium-sized enterprises in the Commodity sector may find it difficult to bear rising costs and will also struggle to pass those costs on to Consumers.
This vulnerability may lead to a customer churn rate higher than normal during an economic downturn, although such a situation is unlikely to occur in the next few quarters. The firm still believes that among the companies it covers, Wix.com and GoDaddy have the strongest fundamentals.
However, the firm has lowered its revenue expectations for GoDaddy’s fiscal year 2025 from $4.934 billion to $4.888 billion, and its Target Price from $260 to $234; for Wix.com, revenue expectations for fiscal year 2025 have been reduced from $1.989 billion to $1.963 billion, and the Target Price has been decreased from $280 to $238.
