Alphabet Named Citi's Top Internet Pick, Amazon Drops to Fourth

(Bloomberg) -- Alphabet Inc., the parent company of Google, was named the top Internet stock pick at Citi, with the search company moving up from a former third-place ranking.

Amazon.com Inc., which was previously ranked number one, dropped to fourth.

Both stocks have been among the market’s strongest performers in recent years, although the gains in Amazon have far eclipsed the rally in Alphabet shares.

“In addition to considering fundamentals, key catalysts and valuations, we are also taking into account expected momentum this year in terms of revenue growth and margin trajectory,” the New York-based firm wrote to clients. Alphabet rose to Citi’s favorite on “continued strong topline growth,” along with “more buybacks and an attractive valuation” that “more than offset continued margin pressures.”

Citi’s relatively lower view on Amazon came as growth in certain areas, including advertising and gross merchandise volume for North American retail, had slowed, while “the pace of margin expansion could moderate in 2019.”

It added that "other factors could emerge,” including “Bezos distractions.” Amazon chief Jeff Bezos recently announced that he and his wife MacKenzie were divorcing, which could raise questions about whether the settlement will impact his control of the company. In addition, Bezos alleged that the publisher of the National Enquirer tried to blackmail him with embarrassing photos of himself and a woman who wasn’t his wife.

Netflix Inc. retained its second-choice status at Citi, while Facebook Inc. moved to third place from fourth. Expedia Inc. was in fifth place, its ranking unchanged.

To contact the reporter on this story: Ryan Vlastelica in New York at rvlastelica1@bloomberg.net

To contact the editors responsible for this story: Catherine Larkin at clarkin4@bloomberg.net, Steven Fromm, Jeremy R. Cooke

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