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Apple, Google, Microsoft, Amazon: Which Analysts Prefer


Sep. 24 2019, Published 3:15 p.m. ET

Tech stocks have been recovering in the current month. Now that we’ve examined Amazon (AMZN) and Microsoft (MSFT) stocks, let’s take a look at analysts’ ratings for Apple (AAPL) and Alphabet (GOOGL) (GOOG).

Amazon is analysts’ favorite due to its growing one-day delivery network and impressive AWS (Amazon Web Services) segment. Amazon also has the best upside potential of 29% based on its mean price target of $2,303.

Most analysts like Microsoft because of its healthy segmental earnings growth and strong expectations for Azure. Microsoft’s mean price target of $155 implies 11% upside potential.

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Most analysts like Google

A total of 38 Wall Street analysts cover Alphabet (GOOGL) (GOOG), and 34 (or 89%) call it a “buy.” The remaining four analysts call Google a “hold.” Analysts’ mean price target on Google stock stands at $1,410, which implies 14% upside potential, the second best among its peers.

Analysts’ enthusiasm in the stock is likely the result of its earnings outlook. They expect Google’s earnings to rise 12% in 2019 and another 14% in 2020. This robust outlook is a result of the company’s expanding revenues from mobile search, YouTube, and its cloud business.

Google is investing heavily in expanding its cloud business to compete with majors such as Amazon and Microsoft in the space. Google’s Other Revenue, which includes its cloud business, rose 40% YoY to $6.2 billion in the second quarter. Its peers’ cloud sales also grew in the quarter. Likewise, AWS grew 37% YoY, while Microsoft’s Azure rose 64% YoY in the latest quarter.

In the Cloud segment, Google Cloud Platform and G Suite continued to provide robust contributions to the company’s sales. Google’s cloud business is growing rapidly. It has an annual run rate of over $8 billion. As per the company, the cloud business is its third-largest revenue driver. It expects this business to expand significantly in the near future.

Further, in the quarter, YouTube drove Google’s mobile search revenue growth. Google’s revenue from its own properties rose 18% YoY to $27.3 billion in the quarter. Its network revenue rose 9% YoY to $5.3 billion driven by Google Ad Manager and AdMob.

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Analysts are divided on Apple

A total of 43 Wall Street analysts cover Apple. Of these, 23 (or 53%) call it a “buy,” 17 (or 40%) call it a “hold,” and three (or 7%) call it a “sell.” Analysts’ mean price target on Apple stock stands at $225, which implies 3% potential upside, the lowest among its peers.

Wall Street analysts have mixed opinions on Apple due to its dull growth forecast. Analysts expect Apple’s earnings to fall 2% in 2019 but rise 9% in 2020 due to its falling iPhone sales and accelerating Services revenue.

Apple’s iPhone sales fell in the third quarter of fiscal 2019. Specifically, its iPhone sales fell from $29.5 billion in the third quarter of fiscal 2018 to $25.9 billion in the third quarter of fiscal 2019. This dragged the company’s product sales down from $43.1 billion in the third quarter of fiscal 2018 to $42.4 billion in the third quarter of fiscal 2019. However, the respite was that Apple’s Mac, iPad, and Wearables, Home, and Accessories sales grew. Apple’s total sales increased in the Americas and Japan but fell in Europe and Greater China.

Many analysts believe that Apple’s iPhone sales will recover. Apple has gathered strong preorders for its recently launched iPhone 11. These sales could boost the company’s earnings next year. To learn more, read Apple’s iPhone 11 Could Drive Fiscal 2020 Sales.

According to Morgan Stanley, “Investor sentiment remains negative despite improving iPhone and Services data points, with low expectations for Sept. quarter suggesting a positive setup into earnings.”

While the company’s Product sales growth slowed in the third quarter, its Services revenue rose. Apple’s Services revenue rose from $10.2 billion in the third quarter of fiscal 2018 to $11.5 billion in the third quarter of fiscal 2019. Further, the Services segment is all set to grow with the launch of its streaming service, Apple TV+.  To learn more, read Apple TV+ to Add $2.5 Billion in Sales by 2021.


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