Heading into the second-quarter earnings season, U.S. internet stocks have experienced a strong rally, supported by slight improvements in gross merchandise volume (GMV) growth and favorable currency shifts, Bernstein reports. However, the future remains uncertain.
“Internet stocks have rebounded sharply along with the broader market,” Bernstein noted, adding that “the group feels more own-able into earnings” due to modest acceleration in GMV and cautious guidance from management teams.
While Bernstein has increased estimates and price targets for several companies, it cautions that this recovery could be fragile. “With multiples back up to (or above) January levels, it’s a tougher question of ‘what next’ coming out of earnings.”
The firm highlighted early signs of stabilization, such as improving credit card data and web traffic, and suggested that the third quarter “could offer some semblance of normalcy.”
Nonetheless, the analysts also raised concerns about risks related to tariffs and competition from Chinese e-commerce platforms. “We may start to feel tariffs soon,” the report warned, adding that “Temu… could return [to U.S. ad spend] at any point,” after stepping back in Q2.
Among the stocks covered, Bernstein identified Amazon (NASDAQ:AMZN) as a top pick, pointing to “top-line acceleration driven by improving performance in core and modest AI-related benefits.”
The firm also anticipates eBay (NASDAQ:EBAY) will deliver “GMV upside vs. guidance once again,” while Etsy (NASDAQ:ETSY) might see benefits from “a moderating decline in GMS,” though the sustainability of this trend is still uncertain.
Overall, Bernstein emphasized that the group’s valuation will depend heavily on GMV trends. “We believe the stocks likely need continued GMV momentum,” the analysts concluded. “If GMV is directionally getting better in guidance, we don’t think multiples will be a problem.”
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