As we step into the new year, it seems like internet stocks are poised for another strong performance. BMO Capital Markets has pinpointed some standout picks for investors eager to seize the opportunity. Analyst Brian Pitz has placed Amazon at the top of his list for 2025. Alongside Amazon, he’s also spotlighted Netflix, Trade Desk, and Google’s parent company, Alphabet, as strong contenders in the realms of internet and interactive entertainment.
Pitz, in a recent note to clients, expressed his high regard for Amazon, emphasizing its strategic advantage in the AI/IT workload shift towards AWS. He cited Amazon’s dominant full-stack position and predicted ongoing retail free cash flow growth, driven by a 30% increase in shopping frequency and reduced capital expenditures on fulfillment centers. Additionally, Amazon’s Warehousing and Distribution and Multi-Channel Fulfillment operations are expanding its fulfillment capabilities across various social channels, broadening the company’s reach in off-platform shopping. This refers to how customers can buy products through platforms outside of Amazon’s own.
Furthermore, the company’s same-day and next-day delivery options bolster its standing in the e-commerce arena, he notes, observing that competitive pressures, particularly from Temu, seem to be diminishing. Amazon’s prowess in AI, especially within its cloud segment, is another significant driving factor. Pitz points out that Amazon Web Services (AWS) provides a plethora of AI chips and foundational models for its clients, including custom chips like Inferentia and Trainium, alongside offerings from Nvidia. So far this year, Amazon’s shares have climbed by approximately 45.5%.
Turning to Alphabet, Pitz suggests that next year, the company could see substantial benefits as AI enhances search monetization. Despite a somewhat tumultuous year, Alphabet has managed to maintain steady revenue growth in both its search ads and cloud businesses, even as it lagged behind some of its megacap peers. The stock has risen over 37% since the start of the year. Highlighting Google’s resilience, Pitz remarks, “We’re once again placing GOOGL as a Top Pick since Search seems de-risked with unexpected success in Gemini adoption and less regulatory pressure.”
Moreover, Pitz anticipates Google will start to clear multiple Department of Justice trials, while AI-related legislation evolves and autonomous vehicle oversight relaxes.
The advertising technology company, Trade Desk, is another of BMO’s strong picks, expected to take the lead in the advertising market once more next year. The company’s stock saw a climb of 67.5% in 2024.
In the video gaming sector, Pitz identifies Take-Two Interactive Software as the frontrunner. He anticipates that the launch of Grand Theft Auto VI could set records as “the highest-grossing video game title of all time,” eyeing sales of 45 million units in its initial release phase next year, which suggests a 36% increase compared to GTA V’s launch.
Pitz asserts, “TTWO, our top choice, is prime to dominate with a powerful lineup headlined by GTA VI’s release. It remains our favorite in the video gaming arena through 2025, buoyed by the Fall 2025 launch of GTA VI.” Beyond this, Take-Two boasts an enticing short-term content pipeline, supported by sequels from established franchises like Mafia and Borderlands, instilling confidence that the company can meet expectations. Pitz is certain TTWO presents the clearest opportunity for growth in the upcoming numbers.
