Now Is Not the Time to Buy Internet Stocks, Eaton Vance Says

(Bloomberg) -- Beware the temptation to rush back to large-cap internet stocks after Amazon.com Inc. and Facebook Inc.’s recent convulsions.

Wall Street has been swift to defend the technology behemoths, hawking buying opportunities in the wake of share-price declines. But one $400-billion asset manager advises holding back on the sector for now.

“In terms of internet stocks, we don’t see this as the time to buy into them, but in other areas of technology there are some good opportunities,” said Chris Dyer, director of Global Equity at Eaton Vance, without naming any specific stocks. Video-game companies, Japanese technology and more traditional IT equipment stocks are areas in which Eaton Vance has been adding to positions in recent weeks, he said.

Amazon shares have fallen 5.8 percent since Axios reported last week that President Donald Trump may target the company’s tax treatment. Facebook -- despite being poised to gain at Thursday’s open after the company said it hasn’t seen any meaningful impact from its mishandling of user data -- is still down 16 percent since the scandal emerged in the middle of last month.

The Amazon pullback has created a buying opportunity, Loop Capital wrote in a note on Wednesday, while Deutsche Bank analyst Lloyd Walmsley said on Thursday that “the worst is likely behind” Facebook.

Eaton Vance had been trimming exposure to some areas within the technology sector, including Internet stocks and some semiconductor names, before recent developments, Dyer said. That decision was based on the view that these companies have had a “strong run” and that newsflow going forward would be more likely to be negative than positive, he said.

Still, the specter of more regulation “is not a clear cut negative” for Internet stocks, Dyer said. While it could limit the ability of companies to monetize some of the personal data they have, it could also create more barriers to entry. “That could actually solidify the platforms that are already in existence,” he said.

Eaton Vance Corp. and its affiliates managed $432.2 billion in assets as of Dec. 31.

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