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Chicago, IL – February 5, 2024 – Today, Zacks Investment Ideas highlights Microsoft MSFT, Alphabet GOOGL, Amazon AMZN, Apple AAPL, and Meta Platforms META.
This week we saw a lot of gains from the market-leading stocks and they disappointed. In addition to many other corporations reporting their results, five of the Magnificent 7 reported to us on their performance.
Last Tuesday, we heard from Microsoft and Alphabet, and then on Thursday afternoon from Amazon, Apple and Meta Platforms.
All of these market-leading companies have performed incredibly well in the stock market over the past 18 months and it looks like this trend could continue. In this article, we’ll take a look at Zacks’ quarterly earnings reports. , valuations and rankings, and check to identify which investments are the most interesting at the moment.
Microsoft: Q2 2024 saw Microsoft soar past expectations with 18% revenue growth and a 33% EPS jump. Their cloud product, Azure, fueled the gain with a 30% surge and doubled its AI integration showcasing commitment to the future. However, a lower-than-expected Q3 revenue forecast was a notable concern. Despite this, Microsoft remains a Zacks Rank #2 (Buy) with its thriving cloud business and dedication to AI advancements.
Alphabet: While Q4 2023 earnings for Alphabet topped EPS estimates by 2%, ad revenue missed expectations slightly, leading to a stock price dip despite an overall 14% YoY sales growth. Their cloud business continues to shine, but concerns linger about growth in the core advertising engine. With a Zacks Rank 3 (Hold), may be a bit less appealing based on earnings estimate trends.
Amazon: The effects of the fourth quarter of 2023 were sweet music to investors’ ears as Amazon beat estimates in terms of earnings and EPS. Its cloud computing division, AWS, continues to be the main engine of expansion, and ad revenue has also exceeded expectations. The positive report pushed inventory value higher and solidified Amazon’s Zacks Rank #2 (Buy) rating.
Apple: Q1 2024 earnings saw Apple beat analyst expectations for both revenue and EPS. Revenue grew 2% YoY to $119.6 billion, and EPS increased 16% YoY to $2.18. While iPhone sales slightly missed expectations, Services revenue reached an all-time high, suggesting a shift towards recurring income streams. The company also achieved a record number of active devices. Apple has a Zacks Rank #3 (Hold) rating.
Meta-platforms: Fourth-quarter 2023 effects exceeded expectations, sending inventory value up more than 20%. Both earnings and EPS beat analysts’ estimates, with earnings expanding 25% year-over-year. The company announced its first quarterly dividend and a $50 billion share buyback, adding to investor excitement. Investment in the Metaverse continues, and its profitability remains a fear for some investors. META has a rank of Zacks No. 2 (buy).
The chart below shows projected earnings multiples for the stocks discussed in this article. We can see that GOOGL and META have the lowest, close to 20x, and AMZN has the highest, 43. 5x.
AAPL and MSFT are in the middle of the pack with 28.4x and 36.2x respectively.
It should also be noted that AMZN, META, and GOOGL are below their 10-year average valuations, while AAPL and MSFT are above them.
I think meta-platforms and Amazon are the biggest promises for new breakthroughs. Amazon’s progression is just impressive to me, with AWS still growing up to 20% and its new advertising business growing up to 23% year-over-year and generating $60 billion in sales consistently. with year.
The success in ads is even more impressive when compared to Alphabet, the leading online ad platforms, whose growth is slowing significantly.
Meta-platforms are also killing it entirely. Even with its 250% growth over the past year and a half, it still trades at a very high earnings multiple. And now, with its new $50 billion buyback plan and a new dividend, a genuine commitment to returning the money to shareholders is emerging.
Alphabet, despite being concerned about expanding expertise in its advertising business, continues to make progress. I don’t think it offers the most productive expansion prospects, but there’s no doubt that it’s the cheapest of the Magnificent 7s, making it a profitable investment.
Apple and Microsoft are, of course, corporations that deserve to be part of any well-diversified investment portfolio, but I think they’re less excited right now than the other three. Apple is seeing a slowdown in iPhone sales growth, and Microsoft happens to be keeping a lot of long-term news in mind, especially when it comes to its recent gains with AI. Premium valuations are also a concern.
However, this organization of global corporations has proven that even with their gargantuan size, they continue to thrive. In addition, they show that the U. S. economy continues to function at a steady pace.
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