Top 3 Internet Stocks For The Second Quarter (Update 1)

NEW YORK (TheStreet) -- Even with the global economy slowing due to weakening numbers out of China and continued austerity measures in Europe, Citigroup likes Amazon(AMZN) , Priceline(PCLN) and LinkedIn(LNKD) as its top three large cap Internet names for the second-quarter earnings season.

Analyst Mark Mahaney believes that valuations for the Internet names are now "neutral," as he slashed second-quarter and full-year earnings estimates for Amazon, Priceline, LinkedIn, as well as Groupon(GRPN) and eBay(EBAY) , explaining that "macro & FX create greater than normal risk this EPS season." Mahaney took down earnings estimates between 1% and 3% for the companies.

Despite these concerns, the analyst says that recent weakness in the price action of certain names is providing attractive entry points, as earnings season kicks off.

Here are Citigroup's top three Internet large cap names for the second quarter earnings season of 2012.

Priceline

The biggest risk for the online travel company is its third-quarter outlook, not the second-quarter earnings result. The Norwalk, Conn.-based firm has the "largest Euro exposure of any Net stock," Mahaney noted in his report. His quarterly estimates are slightly higher than Wall Street, but he sees "greater than typical risk to the downside."

Even with short-term concerns over Europe, priceline is viewed in a very favorable light, as online travel continues to see strong growth.

"We continue to view priceline as a Core Long in the Internet Large Cap sector based on reasonably sustainable competitive advantages in Europe, a countercyclical hedge in the U.S., significant Asia & Latin America growth driver with Agoda and Booking.com, a pretty consistent track record of market share gains, and one of the best management teams in the Internet sector," Mahaney penned in his note. He rates priceline shares "buy" with an $850 price target.

Analysts polled by Thomson Reuters expect priceline to earn $7.36 a share on $1.35 billion in revenue. The company will report its second-quarter earnings results on Aug. 7.

Shares have soared year-to-date, gaining 36.66%, far outpacing the 10.52% return in the Nasdaq.