'Slight Recession' Weighing On Internet Stocks, Per Analyst Firm

The anxiety around world events weighs heavily on the minds of many people. The risks of the global economy are driving a gloomy outlook for the months ahead. 

Baird Capital Analysts late Tuesday lowered stock estimates for a majority of Internet companies the group covers to reflect the impact from a possible mild recession.

The “higher probability to a recession-scenario playing out this year and into next year in key markets, such as North America” would negatively impact consumer spending and lead to lower revenue for many companies it covers, the analysts wrote.

The biggest negative impact will hit digital advertising in a recession -- followed by ecommerce, and then video games, according to the note.

Despite a downward trend, online spending can snap back fairly quickly as companies gain a better understanding of how consumer behavior and demand trends are evolving.

“While we are not basing our estimates on a specific range of GDP declines, we generally assume a mild or moderate recession would last a few quarters with low single-digit contraction in GDP,” per the note. “Near term, our industry checks suggest ongoing sluggish spending in ecommerce, online advertising and video games Q2-to-date; however, most of our changes are for 2023 with a full-year impact and the potential for a slower, extended recovery period.”



Companies in the portfolio include Amazon, eBay, Pinterest, Shopify, Twitter, Wayfair, and Yelp, among others.

Amazon’s stock price on Wednesday as of writing this post sat at $2,160.62, with a 12-month Baird price target of $2,900. Baird analysts lowered 2022 revenue estimate to $517.6 billion (+10% Y/Y), below consensus of $526.5 billion.

The firm also lowered 2023 revenue estimate to $586.5 billion (+13% Y/Y), below consensus of $616 billion


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