Stock markets are bracing for more volatility due to high interest rates, rising oil prices, stubborn inflation, and geopolitical tensions. Given these uncertain times, it could be a good idea to focus on mega-cap stocks (stocks of large companies with at least $200 billion in market capitalization) that have the ability to thrive even during uncertain times and have promising long-term growth potential. Using TipRanks’ Stock Comparison Tool, we placed Meta Platforms (NASDAQ:META), Amazon (NASDAQ:AMZN), and Apple (NASDAQ:AAPL) against each other to find the most attractive mega-cap tech stock as per Wall Street analysts.
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Meta Platforms (NASDAQ:META)
Social media giant Meta Platforms has impressed investors with a solid comeback this year after being under pressure for a couple of quarters due to weakness in digital ad spending and the adverse impact of Apple’s iOS privacy policy changes, which limited its ad-targeting capabilities.
Meta’s revenue grew 11% in Q2 2023 and the company guided for Q3 revenue in the range of $32 billion to $34.5 billion, which indicates year-over-year growth of at least 15%. CEO Mark Zuckerberg is optimistic about the road ahead, backed by strong engagement across Meta’s apps, traction in Threads and Reels, and the company’s artificial intelligence (AI) pursuits. Zuckerberg is also focused on improving Meta’s profitability through efficiency measures.
Is Meta a Buy, Sell, or Hold?
Meta is scheduled to announce its third-quarter results on October 25. Heading into the Q3 results, Mizuho analyst James Lee reiterated a Buy rating on Meta stock last week, with a price target of $400. The analyst highlighted that agency checks indicate that Meta’s advertising revenue growth is tracking ahead of the Street’s consensus. Lee also expects further operating leverage from Meta’s increased efficiency.
The analyst contends that with an estimated exit rate of 20% plus revenue growth, the 2024 growth consensus estimate of 13% seems conservative, given positive leading indicators from improved pricing.
Lee said that while investors are concerned that Meta’s 2024 operating expense guidance could be elevated at 20% year-over-year growth, the possibility of such an outlook seems low due to the narrow product roadmap of Metaverse and a lower possibility of any significant rise in headcount.
With 41 Buys and two Holds, Wall Street has a Strong Buy consensus rating on Meta Platforms stock. The average price target of $376.03 implies 17.1% upside potential. Meta shares have rallied more than 167% year-to-date.
Amazon (NASDAQ:AMZN)
Despite a tough macro backdrop, e-commerce and cloud computing behemoth Amazon impressed investors with its second-quarter performance. The company returned to double-digit sales growth in the second quarter. Moreover, its cost-cutting efforts helped in boosting its earnings.
While sales growth of the company’s Amazon Web Services (AWS) cloud business slowed down to 12%, it beat analysts’ expectations. The AWS business is more profitable than Amazon’s retail business. The company is confident about AWS’s growth potential and believes that it is “poised to be customers’ long-term partner of choice in generative AI.” AMZN is also upbeat about its advertising business, which posted sales growth of 22% in Q2 2023.
What is the Target Price for Amazon Stock?
Ahead of Amazon’s third-quarter results on October 26, Goldman Sachs analyst Eric Sheridan reiterated a Buy rating on AMZN stock last week but lowered the price target to $175 from $180 to reflect higher capital expenditure. The analyst stated that cloud computing industry checks through September indicate that AWS revenue remained largely stable.
He expects stable AWS revenue growth in Q3 2023 over Q2 (at 12% year-over-year) and reacceleration in Q4 (more than 14% year-over-year), driven by easier comparisons, lower pace of spending optimization by enterprises, and growth in new workloads.
Looking beyond the quarterly results, the analyst believes that Prime Video ads could be a nearly $2 billion revenue opportunity for Amazon in 2025, with about a $700 million contribution to consolidated EBIT.
Wall Street has a Strong Buy consensus rating on AMZN stock based on 40 Buys versus one Hold rating. At $176.18, the average price target implies 36% upside potential. Shares have risen about 58% so far this year.
Apple (NASDAQ:AAPL)
Persistent macro uncertainty and high interest rates are weighing on consumer spending on discretionary items, especially big-ticket purchases. Apple’s results in the recent quarters clearly reflect the impact of weak consumer spending on its key products. In particular, revenue from iPhone, Mac, and iPad declined on a year-over-year basis in the fiscal third quarter (ended July 1, 2023). However, an 8% growth in Apple’s Services business helped offset the weakness in product sales to some extent.
Aside from macro pressures, reports on issues related to iPhone 15 and growing competition are also impacting investor sentiment for AAPL stock.
Is Apple a Buy or Sell Right Now?
Apple is scheduled to announce its fiscal fourth-quarter results on November 2. Morgan Stanley analyst Erik Woodring expects Apple to report “a relatively in-line” September quarter, specifying that his revenue estimate of $89.9 billion and EPS forecast of $1.39 are within 1% of the Street’s estimates.
However, Woodring’s December quarter revenue and EPS estimates of $123.8 billion and $2.13 are 5% and 9% lower than his previous forecast, respectively, but are still marginally above consensus revenue and EPS forecasts of $123.2 billion and $2.11, respectively. He expects the December quarter to be impacted by iPhone supply shortages and a stronger U.S. dollar.
The analyst does not expect Apple’s upcoming earnings to be a material catalyst for the stock. He lowered his price target for AAPL stock to $210 from $215 on Monday but maintained a Buy rating.
Including Woodring, 20 analysts are bullish on AAPL stock, while nine have a Hold recommendation, bringing the consensus rating to a Moderate Buy. The average price target of $207.51 implies 16.1% upside potential. Shares have advanced 38% year-to-date.
Conclusion
Wall Street is highly bullish on Meta Platforms and Amazon, while it is cautiously optimistic about Apple. Currently, analysts see higher upside potential in AMZN stock than the other two mega-cap tech stocks. Amazon’s dominance in e-commerce and cloud computing, its prospects in AI, and growing advertising revenue are expected to drive continued growth in the years ahead.
