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As Social and Internet Stocks Fall, Oppenheimer Gets Bullish on One Midcap Tech Name

Scott Mlyn | CNBC

Social media and internet stocks fell to begin the week, reacting to suspensions of President Donald Trump's accounts by Facebook and Twitter.

Even with that politically fraught backdrop, Jefferies gave top ratings to certain stocks in the space – the firm named Facebook as its top pick and predicted further upside for Alphabet and Amazon.

Oppenheimer head of technical analysis Ari Wald agrees with Jefferies' bullish take on the web stocks.

"There's really three reasons why we're bullish on the internet industry," Wald told CNBC's "Trading Nation" on Monday. "One, the industry continues to trend higher. Point two, it's really broadly strong, it goes beyond those three big cap names — it's midcaps, it's small caps as well. And point three is that it's been able to outperform in recent years, really even over the last decade regardless of the direction of interest rates."

Dow Jones' FDN internet ETF, which holds stocks such as Facebook and Twitter, fell 1% on Monday. However, the ETF is up 103% since March lows, outpacing the 73% gain for the S&P 500.

Wald highlights web design stock Wix.com as one internet name that should continue to rally. Oppenheimer's fundamental analysts rate Wix.com as a buy with a $300 price target — it closed Monday just above $266. Wald says its technical setup also backs up the bullish case.

"The stock has corrected into the bullish slope of its 200-day [moving] average, which we define as a near-term opportunity to buy long-term strength," he said. "We think that long-term uptrend continues. In terms of levels, as long as $235 support is upheld, we expect a new high above $316 resistance."

Michael Binger, president of Gradient Investments, is also bullish on the long-term prospects for the internet space, though he warns short-term gains could be capped after the outperformance in 2020. One name he sees as a standout, though, is Amazon.

"Amazon was good last year but most of that performance came into the first half of the year and it's been consolidating in the second half of 2020," he said in the same interview. "The wide moat they have in infrastructure and technology is just expanding. All the trends there are in their favor — work from home, nesting, e-commerce taking share. We really like Amazon here and continue to think that will perform well this year."

Amazon fell 2% on Monday. The stock has risen 91% since March.

"We also like Snap. Snap is kind of an up-and-coming player in the internet space," he said. "Their user base is expanding. The company is starting to monetize that better and they're drawing more ad dollars there. Snap is a company that we feel can still grow its top line 30% plus for the next three years."

Snap bucked the tech downturn on Monday, rising fractionally to $54.55. The stock has surged nearly 600% since March.

Disclosure: Gradient holds AMZN and SNAP.  

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