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Investing.com -- Morgan Stanley believes certain internet stocks are well-positioned to weather a potential economic downturn, citing strong free cash flow generation and innovation in GenAI/GPU-enabled applications.
In a note on Tuesday, the firm named Meta (NASDAQ:META), Amazon (NASDAQ:AMZN), Alphabet (NASDAQ:GOOGL), Reddit, and Chewy (NYSE:CHWY) as the top names in this environment.
“The list of macro uncertainties and concerns (tariffs, DOGE, labor markets, inflation, slowing spend across certain verticals) that could have material impacts on consumer and enterprise spend continues to grow,” said Morgan Stanley (NYSE:MS).
While some risks are already reflected in valuations, a deeper consumer-led downturn is not fully priced in and could further pressure estimates, according to the bank.
Investors are likely to favor “higher quality, free-cash-flow generative names” with more predictable 2026 cash flows, the firm added.
In digital advertising, META, GOOGL, and AMZN are expected to fare better than smaller platforms such as Snap, Yelp (NYSE:YELP), and Pinterest (NYSE:PINS).
While ad spending is cyclical, the bank says larger platforms benefit from engagement, measurability, and ad-return performance.
Morgan Stanley also sees potential in Reddit due to its improving ad offerings and lower-priced inventory.
For e-commerce, Amazon and Chewy are favored due to their staples exposure and high-income customer base, while discretionary retailers like Revolve, Figs, and Peloton (NASDAQ:PTON) face higher risk.
“With eCommerce at ~25% of total adjusted retail sales, a consumer pullback would have a meaningful impact,” the firm noted.
In the shared economy and travel sector, Morgan Stanley notes that Uber (NYSE:UBER) and DoorDash (NASDAQ:DASH) have been resilient due to high-income customer reliance, but they believe any slowdown in discretionary spending could pose risks.
Morgan Stanley believes that among travel names, Booking (NASDAQ:BKNG) is best positioned due to its scale and cost-cutting ability, while Airbnb could face pressure from its investment cycle.