When it comes to pure-play technology companies like Microsoft and Apple, website traffic data is an important tool. This is because, for these companies, most of the retailing takes place online. This is especially true when it comes to selling software and devices such as smartphones, PCs, and wearables to individual customers.
Using the TipRanks stock comparison tool, we will compare two technology giants, Microsoft and Apple, and see whether their performance in the December quarter can be gauged using the Website Traffic tool on TipRanks. We will also look at what Wall Street analysts are saying about these stocks.
Microsoft (NASDAQ: MSFT)
Microsoft dominated the headlines recently as it announced an all-cash acquisition of Activision Blizzard (ATVI) for $68.7 billion. Analysts believe that this acquisition will extend the company’s footprint in the gaming industry.
While this acquisition bodes well for MSFT when it comes to its gaming business, it will be interesting to see how MSFT’s key cloud business fares in the upcoming earnings for fiscal Q2. MSFT earnings for fiscal Q2 are expected to be announced next week, on January 25.
In fiscal Q1, MSFT’s cloud business surpassed $20 billion in revenues for the first time and jumped 36% year-over-year.
Wedbush analyst Daniel Ives thinks that the company’s Azure cloud growth story is just starting. The analyst’s checks for the December quarter have indicated that MSFT has entered into large cloud deals that could be up more than 50%, indicating such deals are gaining momentum entering into 2022.
What’s more, Ives believes that there is still room for Microsoft to penetrate the cloud market further, as he pegs MSFT’s current cloud penetration at 35%.
The analyst also approves of MSFT’s hike in the price of Office365 and thinks that it was a “smart strategic poker move that could be another $5 billion+ incremental tailwind for Redmond in 2022, giving more confidence that numbers could continue to move higher.”
MSFT announced the price hike for its Office365 in August last year. Customers who were using a monthly subscription to Office365 faced a price rise of 20%.
The COVID-19 pandemic has forced many companies to switch to remote work or a hybrid model, where people come into work at the office for certain days of the week and at other times, work remotely.
Analyst Ives expects this trend will continue and will benefit companies providing cloud computing services like MSFT, Amazon (AMZN) with its Amazon Web Services (AWS), IBM (IBM), and Alphabet (GOOGL).
By the analyst’s estimate, the number of companies maintaining their workloads in the cloud will increase from 43% currently to 55% by the end of this year. What’s more, Ives expects that “global cloud spending will approach $1 trillion over the next decade,” effectively representing a $1 trillion total addressable market (TAM) for MSFT.
Even as the stock has shot up 35.96% in the past year and is currently trading at a price-to-earnings ratio of 33.9, Ives still thinks that the stock could go up even higher over the next 6 to 9 months, “as the Street is still underestimating the underlying growth story in Redmond in our opinion.”
Microsoft remains one of Ives’ favorite technology picks for this year and the analyst remains bullish with a Buy rating and a price target of $375 (23.6% upside) on the stock.
Overall, the rest of the analysts on the Street, are also bullish about the Microsoft growth story, with a Strong Buy consensus rating based on 27 Buys and 1 Hold. The average MSFT stock prediction of $375.12 implies upside potential of approximately 23.7% to current levels for this stock.
The Street’s bullish outlook on the stock is also supported by the Website traffic data tool available on TipRanks. This tool indicates that in the month of December alone, Microsoft’s unique visitors across all its domains were up 8.6% year-over-year to 1.6 billion. In calendar Q4, Microsoft’s unique visitors across all its domains have increased year-over-year by 8.5% to 4.9 billion.
Apple (NASDAQ: AAPL)
Apple, unlike technology giant Microsoft, is not in the cloud business, but the company competes with Microsoft when it comes to its personal computers business. Apple’s business of manufacturing smartphones, personal computers (PCs), tablets, wearables, and accessories suffered an impact of $6 billion in terms of revenues in the fiscal fourth quarter, due to supply chain constraints.
The company also stated on its earnings call that by its estimate, the adverse impact of supply chain shortages will be bigger during the December quarter, even as demand for AAPL’s products continues to be high.
Apple is expected to announce its December quarter results on January 27.
The company elaborated more on the supply chain constraints on its September quarter earnings call. While Apple expects that revenues will continue to show an upward trend for most of its categories, the company estimates that iPad revenues could trend downward in the December quarter due to these supply chain challenges.
Do Wall Street analysts continue to see this trend persisting, just before its December quarter?
UBS analyst David Vogt didn’t mention the iPad revenues but continues to see upside in iPhone and iMac, fueled by strong demand. That has led him Vogt raise his estimates for fiscal Q1 (December quarter) revenues from $117.5 billion to $119.6 billion and earnings from $1.85 per share to $1.91 per share.
The analyst added, “Despite near-term iPhone strength, we keep our FY2022 iPhone unit estimate unchanged at 230M as we prefer to be conservative given lingering supply chain headwinds and uncertain carrier promotional activity next fall and winter.”
Moreover, the analyst’s channel checks indicated that supply chain challenges continued to improve on a month-over-month basis during the fiscal Q1 quarter. Vogt also mentioned that consumers continued to prefer high-end iPhone models like Pro and Max and are more likely to spend more than $1,000 on the iPhone.
As a result, the analyst raised his estimate for iPhone units by 3% from around 52.3 million to 53.8 million units for the March quarter. The analyst remained upbeat about the stock with a Buy rating and a price target of $175 (5.3% upside) on the stock.
Other analysts on the Street echo Vogt and are also upbeat about Apple, with a Strong Buy consensus rating based on 22 Buys, 4 Holds, and 1 Sell. The average Apple stock forecast of $179.80 implies upside potential of approximately 8.2% to current levels for this stock.
But the Street’s bullish outlook on the stock is contrary to the Website Traffic data available on TipRanks. This data indicates that in the month of December alone, Apple’s unique visitors across all its domains were down 7.8% year-over-year to 241.1 million. In calendar Q4, Apple’s unique visitors across all its domains have also declined year-over-year 6.2% to 756.7 million.
Bottom Line
Analysts’ bullish stance on both stocks seems to be justified, considering that both companies are poised for growth, with MSFT and its cloud business and AAPL’s effective management of supply chain challenges.
Based on the upside potential over the next 12 months, MSFT seems to be a better Buy.
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