The recently-reported earnings reflected the efforts taken by technology companies to cut down costs and streamline their operations as risks of a potential recession remain. While macro headwinds persist, many tech companies fared better than the Street’s expectations. Here, we used TipRanks’ Stock Comparison Tool to place Meta Platforms (NASDAQ:META), Microsoft (NASDAQ:MSFT), and Amazon (NASDAQ:AMZN) against each other to pick the most attractive tech stock at the current levels.
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Meta Platforms (NASDAQ:META)
Social media giant Meta Platforms returned to growth in Q1 2023 after three straight quarters of revenue decline due to the macro pressures on digital ad spending. Revenue increased 2.6% year-over-year to $28.6 billion, while EPS declined 19% to $2.20. Both the metrics came ahead of the Street’s expectations.
The Q1 bottom line was impacted by $1.14 billion of restructuring charges related to the company’s efforts to streamline its operations and reduce costs, including severance and personnel costs related to layoffs.
While the company is cutting down costs in certain areas, it continues to build its artificial intelligence (AI) capacity to support ads, Feed, and Reels, and invest in generative AI initiatives.
Is META Stock a Good Buy?
Last week, Guggenheim analyst Michael Morris boosted his price target for Meta stock to $320 from $240 and reiterated a Buy rating.
Morris feels that while the focus was on the improved revenue trends in Q1, accelerated DAU (daily active users) growth driven by AI investments should boost investor confidence about Meta’s ability to “effectively compete with TikTok and other platforms for consumer engagement.”
Wall Street’s Strong Buy consensus rating for Meta Platforms is based on 41 Buys, five Holds, and three Sells. The average price target of $271.42 suggests 11.5% upside. Shares have skyrocketed 102% since the start of this year.
Microsoft (NASDAQ:MSFT)
The buzz around Microsoft’s AI initiatives and better-than-expected results for the fiscal third quarter have driven MSFT shares higher this year. Q3 FY23 EPS increased 10% to $2.45, driven by a 7% rise in revenue to $52.9 billion.
The top-line growth was driven by 16% growth in the Intelligent Cloud segment and an 11% growth in the Productivity and Business Processes division. However, weakness in the PC market hit the More Personal Computing segment. Revenue from Azure and other cloud services increased 27%, which came in better than analysts’ estimates but indicated a slowdown compared to Q2 FY23.
Meanwhile, Microsoft is upbeat about its AI initiatives and the growth potential of its AI-powered tools. The company launched its AI-powered Bing search engine and Edge browser in the quarter and disclosed significant investments in ChatGPT-creator OpenAI.
What is the Price Target for MSFT Stock?
Last week, RBC Capital analyst Rishi Jaluria increased the price target for Microsoft stock to $350 from $285 and maintained a Buy rating. Jaluria thinks that the company’s “surprisingly clean” beat-and-raise quarter should help address some concerns across software, including those around cloud saturation, given that AI is set to be the next growth avenue.
Overall, the Strong Buy consensus rating for Microsoft is based on 30 Buys, three Holds, and one Sell. The price target of $328.39 suggests 7.5% upside. Shares have risen over 27% year-to-date.
Amazon (NASDAQ:AMZN)
E-commerce giant Amazon reported better-than-projected results for the first quarter. However, investors were disappointed with the management’s warning about a continued slowdown in the Amazon Web Services (AWS) cloud business. The high-margin AWS unit is considered to be a key growth driver.
Amazon’s Q1 2023 revenue grew 9% to $127.4 billion. The company generated an EPS of $0.31 compared to a loss of $0.38 in the prior-year quarter. AWS revenue increased about 16% to $21.4 billion but decelerated compared to the 20% and 28% growth witnessed in Q4 and Q3 2022, respectively. The impact of macro pressures on IT spending is weighing on the performance of AWS.
Nonetheless, the company is positive about the growth ahead, driven by its streamlining efforts and strategic initiatives in its retail, AWS, and advertising businesses.
Is Amazon Stock a Buy, Sell, or Hold?
Amazon’s Q1 results prompted Wedbush analyst Michael Pachter to raise his price target to $129 from $125 and reiterate a Buy rating on April 28. Pachter feels that Amazon’s outlook was “far better than feared,” despite a slowdown in AWS.
The analyst believes that Amazon is well positioned to continue to deliver better-than-anticipated profitability once inflation is addressed and recession fears fade away. His optimism is backed by a favorable high-margin mix of AWS, growing advertising business, and third-party seller services.
The analyst highlighted that Amazon has displayed its ability to grow amid falling ad demand, tightening IT budgets, and slowing consumer spending through the performance of its AWS, ads, and subscriptions segments.
With 37 Buys and one Hold, Amazon stock scores a Strong Buy consensus rating. The average price target of $137.20 suggests 34.4% upside. Shares have advanced 21.5% since the start of this year.
Conclusion
While analysts are bullish on all the three tech stocks discussed here, they see more upside in Amazon from current levels. Despite the slowdown in Amazon’s cloud business over recent quarters, Wall Street continues to be optimistic about the long-term growth potential and dominant position of AWS. Moreover, they believe in the company’s ability to maintain its leadership in the e-commerce space and the prospects of the rapidly growing advertising business.
Aside from analysts, hedge funds are also bullish on Amazon and increased their holdings by 17.3 million shares last quarter. As per TipRanks’ Hedge Fund Trading Activity Tool, hedge funds have a Very Positive confidence signal on Amazon.
