By Stephen Karmazyn, BA

Published: February 28, 2017

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Stephen Karmazyn, BA
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What Are the Best Internet Stocks to Buy for 2017?

Internet StocksBest Internet Stocks for 2017

Sorry to use a cliché, but the oft-repeated fact that a large majority of companies on the Fortune 500 today either didn’t exist or weren’t on the list 30+ years ago just goes to show you the power that the Internet has had on our economy. Our world is still undergoing the greatest economic change since the industrial revolution, termed the “digital revolution.”

And the stock market is not immune to the changing powers of the online world. The best Internet stocks for 2017 are here and waiting for the savvy investor to take advantage of potentially huge gains. With that in mind, let’s look over my picks for some of the best Internet stocks to buy now.

But before we do that, it’s worth remembering why Internet stocks are so hot right now.

Let’s take a look at the newspaper business, for instance. President Donald Trump complaining about “fake news” is hardly the most pressing problem facing the broadsheet industry. Since advertising revenue has fled from newspapers, the business has seen a drastic reduction in production abilities and profits.

Couple that with the proliferation of online news sources and a deepening divide between news echo chambers, and you have a perfect example of the Internet not only drastically altering our economy, but also some of the most crucial aspects of our lives.

And a final X-factor in Internet stocks comes by way of the new president. Some analysts are concerned that Trump will prove damaging to some of the larger Internet stocks, advising investors to be wary of some of the bigger Internet stocks out of fear of Trumpian wrath. Silicon Valley is not exactly known, after all, for its pro-Trump stances. (Source: “The 4 Best Tech Stocks to Buy Instead of Facebook or Amazon for 2017,” Fortune, December 1, 2016.)

Others, however, are bullish on the new president’s effect on the online markets, adding another layer of intrigue to this year’s stock picks.

But what Trump does or doesn’t do for Internet stocks is just a blip on the radar for one of the hottest sectors on the market. To borrow another overused term, the disruption we’re experiencing by the digital age isn’t likely to subside any time soon. Which is great for Internet stocks 2017 and great for those investing in Internet stocks. In fact, 2017 is looking poised to be a great year for tech stocks in general.

Let’s get on to the Internet stock list and my picks for the best Internet stocks in 2017.

Top Internet Stocks List

              Best Internet Stocks                              Ticker
                                1                                 FB
                                2                       Palantir – TBD
                                3                              PANW
                                4                               NFLX

1. Facebook Inc (NASDAQ:FB)

This is hardly an under-the-radar pick, but Facebook Inc (NASDAQ:FB) is in a strong position to not only show big gains in 2017, but also for the foreseeable future.

The fact is that the company has grown from a social media company to one of the most dominant tech empires the world has ever seen. Maybe a tad hyperbolic, sure, but let’s look at all the dishes that Facebook is currently cooking up.

You have the “Oculus Rift” technology, a headset focused on virtual reality (VR) that could become the hardware of choice for consumers as more and more of the tech releases into the market.

And don’t forget that VR and its sister technology, augmented reality (AR), are gearing up for big gains in the near future.

Then you have some key and very intelligent acquisitions, like that of Instagram. The photo sharing company was touted as a potential Facebook killer, with the younger generation flocking to the app in droves. So what did Facebook do? It bought out the competition. That makes Facebook not just a top Internet stock to buy now, but just an overall well-run company.

The company faces challenges from upstarts like Snap Inc., whose initial public offering (IPO), slated for March, could introduce another behemoth social media/tech company into the mix and therefore threaten a chunk of Facebook’s market cap.

Of course, there’s no reason a user can’t use Snap Inc.’s “Snapchat” and Facebook, but Instagram has increasingly encroached on Snap’s market, meaning those two apps could theoretically enter into direct competition as both look to continue fostering strong growth numbers.

But no matter what happens, Facebook has the tools, resources, and pedigree to continue making it one of the top Internet stocks to buy now. Consider that FB stock has already grown over 18% since the beginning of the year, and you’ll see why I’m bullish on the online leviathan.

2. Palantir Technologies

While technically not available on the market yet, Palantir Technologies has great potential to be one of the best Internet stocks for 2017.

The company has been skittish when it comes to its IPO plans but, with Peter Thiel being part of the leadership and a path to profitability (which is quite rare for a budding Internet company), you have what could be one of the most valuable IPOs in recent years.

The question facing Palantir, of course, is whether the company will have its IPO in 2017.

Currently, there’s strong evidence that the company’s management is opposed to taking Palantir public. CEO and co-founder Alex Karp, speaking at a 2016 The Wall Street Journal technology conference, said, “[p]hilosophically, I have always been opposed to going public. First of all, I have noticed, very empirically . . . I have never seen a company that is public compete effectively against us (for engineers).” (Source: “Will Palantir Launch an IPO?” The Wall Street Journal, October 26, 2016.)

On the other hand, the company is on its way to profitability. In that case, management’s hand might be forced and the company will see an earlier IPO than expected.

The company specializes in big data analysis, a sector likely to grow quickly in oncoming years, making Palantir one of the potentially hottest stocks when it does hit the open markets.

3. Palo Alto Networks Inc (NYSE:PANW)

With all the recent hubbub being drummed out concerning hacks and privacy breaches, it stands to reason that companies focusing on security will have found many a new clients in recent times.

Palo Alto Networks Inc (NYSE:PANW) creates firewalls and other online protections, and has been on a tear in 2017. The stock is up 22% already since the beginning of the year, and 20% overall in the past 12 months.

As the Internet of Things and other technological advances change the way we do business, cybersecurity will only grow in importance. Spending on cybersecurity equipment, including firewalls, was set to grow about 13% in 2016 to $10.6 billion. Palo Alto, however, blew those numbers out of the water, growing four times as fast. (Source: “The 4 Best Tech Stocks to Buy Instead of Facebook or Amazon for 2017,” Fortune, December 1, 2016.)

Strong growth potential in an online industry poised to play an important role in our future is a winning combination. All this makes Palo Alto Networks one of the best Internet stocks 2017.

4. Netflix, Inc. (NASDAQ:NFLX)

Another huge, well-known name hitting our list, Netflix, Inc. (NASDAQ:NFLX), is on pace to make waves in 2017, much as it has done in years past. The company’s stock price has already shot up by over 15% since the beginning of 2017. With much of its recent program rollouts winning not only commercial success, but also critical acclaim, you have what may be NFLX stock just beginning to hit its full stride.

As more and more premier programming comes out of the Internet streaming giant, expect the stock price only to soar higher. The company is still on a 60% run over the past 12 months, again spurred on by stellar television.

And not only has the television streaming service been good, but much of it has been resonating with the public and becoming the sort of cultural touchstones that previously were reserved for premium TV networks like HBO.

Add in the fact that Netflix’s competitors like Amazon.com, Inc. (NASDAQ:AMZN) have so far largely floundered in their attempts to dethrone the streaming giant, and you have all the makings of a stable stock set to climb ever higher.

Conclusion

When it comes to buying Internet stocks in 2017, you certainly no lack of options.

From the giants like Facebook and Google (otherwise known as Alphabet Inc NASDAQ:GOOG)) to the lesser known companies like a Palo Alto Networks to the newcomers like Palantir and Snap, there’s a ton of options for those interested in investing in Internet stocks.

The question is sorting out which stocks have the best value and the best growth potential.

Above I’ve outlined four stocks that I believe are either poised to reach their full potential or stay on track for continued dominance. Facebook and Netflix make up two parts of the famous FANG four (Facebook, Amazon, Netflix, and Google) and are some of the most well regarded stocks on the market.

Palo Alto and Palantir both operate in markets with huge growth potential. So whether your fancy is steady and reliable stocks, or a more risk-reward-type bets, there’s something for everyone on this list.

It is important to remember that technology is inherently volatile, with disruption being the buzzword of the day. Companies are constantly looking over their shoulders, less they be taken unawares by some new Internet stock gunning for their mantle. Just ask Yahoo! Inc. (NASDAQ:YHOO).

But that doesn’t mean these aren’t great stocks worthy of your investment. As with all things, invest with knowledge, invest with caution, but above all, invest smart.