3 Top Stock Picks Set to Benefit from Fed Rate Cuts

After navigating a period marked by intense macroeconomic challenges and policy tightening, the U.S. central bank is set to make a significant policy shift on Sept. 17-18, with expectations running high for the Fed's first interest rate cuts since the pandemic's peak. 

As investors eagerly await this pivotal rate decision, Cantor Fitzgerald has initiated coverage on 22 global internet stocks, highlighting a select few as Top Picks that are well-positioned to capitalize on both the Fed’s anticipated policy shift and the rapid advancement of artificial intelligence (AI). 

Despite robust performance over the past 18 months, the brokerage firm highlighted that internet stock valuations remain attractive and stand to benefit from anticipated rate cuts, even as top-line growth slows and cost-cutting benefits wane. In this context, let’s take a closer look at three standout internet stocks that have earned their place on Cantor’s Top Picks list.

Stock #1: Meta Platforms

With a massive market cap of $1.26 trillion, California-based Meta Platforms, Inc. (META) is the global leader in social media. Since Facebook's revolutionary debut in 2004, Meta has transformed global communication, extending its influence through platforms such as Messenger, Instagram, and WhatsApp and broadening its reach on a global scale. After reshaping the social media landscape, Meta is now leading the way in the next phase of social technology by creating immersive experiences in augmented and virtual reality. 

Shares of this mega-cap stock have rallied 69.4% over the past 52 weeks, easily outpacing the broader S&P 500 Index’s ($SPX)22.5% gain during this period. Plus, in 2024, the stock is up 42.5%, soaring beyond the SPX’s 14.4% return on a YTD basis.  

Despite Meta’s strong price action, the stock is trading at 23.4 times forward earnings, which is right in line with its own five-year average. On Sept. 5, the social media giant announced a quarterly dividend of $0.50 per share, set to be distributed to its shareholders on Sep. 26. The company’s annualized dividend of $2.00 per share offers a 0.40% yield. 

After releasing its Q2 earnings results on July 31, which exceeded Wall Street's expectations on both the top and bottom lines, shares of Meta soared more than 4% in the next trading session. The company reported revenue of $39.1 billion, marking an impressive 22% year-over-year increase and slightly surpassing estimates. Additionally, EPS reached $5.16, up a remarkable 73.2% annually to beat projections by 9.8%.

The company ended the quarter with approximately $58.1 billion in cash, cash equivalents, and marketable securities, as well as a solid free cash flow of $10.9 billion. 

For Q3, management projects total revenue to range between $38.5 billion and $41 billion. Looking ahead to fiscal 2024, the company has raised its capital expenditure forecast to a range of $37 billion to $40 billion, up from the previous estimate of $35 billion to $40 billion. While detailed guidance for fiscal 2025 will be provided in Q4, Meta expects a notable increase in infrastructure costs next year, driven by depreciation and operational expenses from its expanded infrastructure. 

Additionally, capital expenditures are expected to rise significantly in 2025, fueled by investments in AI research and product development. Analysts tracking Meta project the company’s profit to increase 43.6% year over year to $21.36 per share in fiscal 2024, and jump another 12.7% to $24.07 per share in fiscal 2025.

Cantor Fitzgerald has assigned an “Overweight” rating to META stock. The brokerage firm sees Meta having "plenty of levers" to drive market share growth, predicting that AI advancements will fuel increased engagement, monetization, and revenue growth over the next two to three years.

META stock has a consensus “Strong Buy” rating overall. Out of the 44 analysts covering the stock, 38 suggest a “Strong Buy,” one advises a “Moderate Buy,” three recommend a “Hold,” and two have a “Strong Sell” rating.

The average analyst price target of $575.36 indicates a potential upside of 14% from the current price levels. However, the Street-high price target of $660 suggests that META could rally as much as 30.8%.

Stock #2: MercadoLibre

Uruguay-based MercadoLibre, Inc. (MELI) is Latin America's largest online commerce ecosystem and a leading fintech platform, operating across 18 countries. The company enables e-commerce and digital financial services through advanced technology. Its e-commerce platform is a robust and secure online marketplace that has garnered comparisons to eBay (EBAY) and Amazon (AMZN), while its fintech arm, MercadoPago, provides a comprehensive range of financial solutions both within and beyond the e-commerce platform, tackling the unique challenges of the Latin American market. 

Valued at $100.7 billion by market cap, shares of this online retailer have climbed 41.2% over the past year and 28.3% on a YTD basis, outperforming the broader SPX during both these time frames. 

From a valuation standpoint, MELI stock is priced at 4.92 times forward sales, which is significantly lower than its own five-year average, suggesting a potentially attractive entry point for investors relative to historical norms. 

Following the company’s Q2 earnings results on Aug. 1, which shattered Wall Street's top and bottom line forecasts, shares of MercadoLibre jumped by a notable 10.6% in the subsequent trading session. The company’s total revenue of $5.1 billion soared 41.5% year over year and topped estimates by 8.3%, while earnings of $10.48 per share demonstrated a remarkable 110.3% annual improvement and crushed projections by an impressive 20.2% margin. 

During the quarter, MercadoLibre’s adjusted free cash flow surged to $678 million, up from just $145 million recorded in Q2 of fiscal 2023, despite increased capital expenditures and credit portfolio funding. This impressive cash flow performance and the recent reduction in leverage ratios prompted S&P to revise its credit rating outlook on MercadoLibre to "Positive" in June. 

While the company didn’t offer formal guidance, analysts tracking MercadoLibre projected the company’s bottom line to hit $35.22 per share in fiscal 2024, marking a notable 81% year-over-year increase. Looking forward to fiscal 2025, profit is forecast to rise another 31.3% annually to $46.23 per share.  

MercadoLibre has earned an “Overweight” rating and a spot on Cantor Fitzgerald’s Top Picks list thanks to its strong fundamentals in both fintech and e-commerce. Cantor highlights the company's potential to expand margins through its advertising, credit, and financing offerings.

Overall, Wall Street is bullish, with a consensus “Strong Buy” rating for MELI stock. Of the 14 analysts covering the stock, 12 advise a “Strong Buy,” and the remaining two recommend a “Hold.” 

The average analyst price target of $2,179.28 indicates an 8.2% potential upside from the current price levels. However, the Street-high price target of $2,530 suggests that MELI could rally as much as 25.6% from here.

Stock #3: DoorDash

San Francisco-based DoorDash, Inc. (DASH) is a global technology company connecting consumers with local businesses in over 30 countries. Since its 2013 founding, DoorDash has expanded well beyond delivering restaurant carryout orders to consumers, and now provides local delivery services including liquor, pet supplies, groceries, flowers, and more.

Valued at a market cap of roughly $50.5 billion, shares of DoorDash have outperformed the broader market, with gains of nearly 51.3% over the past year and almost 26% on a YTD basis. 

After the company revealed its Q2 earnings results on Aug. 1, shares of DoorDash took off more than 8% the next day. Total revenue of $2.6 billion was up 23% year-over-year and topped Wall Street’s forecasts by 3.6%. The company trimmed its loss to $0.38 per share compared to $0.44 per share in the year-ago quarter, and adjusted EBITDA rose by 54% to a record high of $430 million. 

During the quarter, DoorDash achieved remarkable growth, with Total Orders jumping 19% year-over-year to 635 million and Marketplace gross order value (GOV) rising 20% annually to $19.7 billion. This surge was driven by an expanding customer base and increased engagement. In Q2, DASH set new highs in Total Orders, Marketplace GOV, and revenue. 

Looking ahead to Q3, management forecasts Marketplace GOV to range between $19.4 billion and $19.8 billion, with adjusted EBITDA anticipated to range from $470 million to $540 million. 

Cantor Fitzgerald forecasts a "decent possibility" of positive GOV and EBITDA revisions in the near future, which should continue to bolster the stock’s performance. Supported by these positive factors, the firm has assigned an “Overweight” rating to DASH stock. 

DASH stock has a consensus “Moderate Buy” rating overall. Of the 36 analysts in coverage, 20 suggest a “Strong Buy,” two recommend a “Moderate Buy,” and the remaining 14 have a “Strong Sell” rating.  

The average analyst price target of $142.32 indicates a potential upside of 14.7% from the current price levels. The Street-high price target of $170 suggests that DASH could rally as much as 37%.