Highlights of Zacks Investment Ideas: Apple, Amazon, Alphabet, Activision Blizzard, Microsoft

for immediate posting

CHICAGO, IL – April 25, 2022 – Today’s Zacks Investment Ideas feature highlights Apple AAPL, Amazon AMZN and Alphabet, Inc. GOOGL, Activision Blizzard ATVI, and Microsoft MSFT.

Heading into third-quarter earnings, is Microsoft (MSFT) a buy?

Technology stocks have fallen year-to-date, with several high-performing companies underperforming the general market. Below is a chart showing the performance to date of four major technology stocks – Apple, Amazon and Alphabet, Inc. and Microsoft – while also comparing the performance of the S&P 500 and Zacks – the performance of the computer and technology sector.

As we can see, it has been a tough year for technology. In fact, Apple is the only technology stock on the list that shows a higher defense level than the general market so far. Near the bottom of the graph with the worst performance year-to-date, we find Microsoft.

However, when looking at the performance over the past year, we can see that Microsoft is actually the second best performer. Amazon is the only tech stock on the list that hasn’t outperformed the general market in the same time frame.

While Microsoft has been generally strong over the past year, current performance to date is a recent slight break with its tech peers. MSFT is due to report its third-quarter 2022 results next Tuesday after the bell rings, so let’s break down the critical aspects of the report and see if stocks bounce back.

Effect of ex-dividend price

In its second-quarter 2021 earnings release, MSFT reported earnings of $2.48 per share, which easily beat Zacks’ consensus estimate of 8%. It seems the market was expecting more. Shares rose just 0.11% after the report.

In fact, Microsoft’s stock price has risen in value only three times from its last six earnings reports, despite beating EPS estimates in each report. The most significant impact on the stock price occurred in the 2021 Q1 report, with shares up nearly 5% after the October report of a 7% rise in the Nasdaq Technology Index. With the Nasdaq struggling year-to-date (down nearly 16%), the strong earnings release may not be enough to hijack the downside.

growth engines

For the third quarter, metrics that investors should watch with interest include Microsoft cloud (Azure) revenue and game services revenue. These are two important growth drivers going forward; The video game industry is booming, and cloud computing is constantly becoming a vital aspect of technology.

MSFT Cloud revenue was $22 billion last quarter, a marked increase of 32% year over year. As of now, Microsoft is the second largest provider of cloud-based infrastructure after Amazon. Additionally, MSFT’s gross margin for its cloud services increased $2.3 billion, or 21%, in the second quarter of 2022, driven by growth in Azure and other cloud services.

In the second quarter, revenue from gaming services increased $411 million, or 8%, benefiting from the launch of Xbox Series X | S and requests to stay at home. Additionally, with its acquisition of Activision Blizzard in January, Microsoft intends to publish all Activision Blizzard games on Xbox Game Pass, a service of more than 25 million subscribers at a low monthly cost of $9.99. The ATVI game library, which has more than 400 million monthly active players, is expected to boost Microsoft’s gaming revenue going forward.

Microsoft Revenue – Quarterly | Microsoft Corporation, Quote

Q3 estimates

For the third quarter, the consensus estimate trend has changed moderately over the past 90 days, currently reflecting quarterly earnings of $2.18 per share versus earnings per share of $1.95 in the third quarter of 2021. In addition, an analyst revised earnings estimates for the third quarter. The stock for the third quarter has been down over the past 60 days.

Zacks consensus estimate for third-quarter revenue is approximately $49 billion, reflecting a significant year-over-year expansion of the top streak of 17%. In the second quarter of 2022, MSFT earned $45 billion and exceeded revenue estimates by about 3%, driven by strong adoption of Azure cloud offerings.

Unfavorable forex trading is expected to hold back revenue growth of 2% for the next quarter. Productivity and commercial operations revenues are expected to range between $15.6 – 15.85 billion; Strong momentum in Office 365 is expected to drive growth in this segment.

Cloud services and commercial products are expected to grow in the low double-digit range, driven by demand for Microsoft 365 and advanced security solutions. Additionally, single-digit gaming revenue is expected to grow, but MSFT states that Xbox Series S | X could affect growth in the gaming sector.

Overall, Microsoft will benefit from strong and well-established trends within its segments. However, the widespread use and revenue of the company’s products has risen due to the pandemic restrictions, and Microsoft sees this as a factor that could dampen growth rates in the future.

apple

Tech giant Apple is also scheduled to report quarterly results next week. Over the past four quarters, Apple has commanded a noticeable surprise 20% for its average EPS, and in its most recent report, AAPL beat its estimates by double digits by 11%.

Analysts expect quarterly earnings per share of $1.44, buoyed by three positive revisions to estimates over the past 60 days and reflecting 3% year-over-year earnings growth. Earnings are expected to grow approximately 10% for the current fiscal year.

Zacks Consensus’s sales estimate for AAPL is estimated at $94 billion, compared to $89.6 billion in sales for the year-ago quarter. Additionally, as the quarterly report approaches, Apple has an ESP score of 0.54%.

Apple has a Zacks rating of #2 (Buy) with a VGM score of B.

Apple Inc. Price chart – consensus – EPS – surprise | Apple Inc. Quote

minimum

With the tech-heavy Nasdaq down significantly for a year now, tech stocks have been almost sold out throughout 2022. No one has a magic crystal ball telling them where the market is headed next, but until tech stocks surprise their bearish trends, it’s worthwhile for investors to wait before buying The stocks of these companies are flying high.

Basically, Microsoft has consistently shown strong growth rates, and EPS estimates have been increasing. However, the company’s top line has been boosted by increased stay-at-home orders and other restrictions that have brought the world online.

The performance of tech stocks to date keeps me from being aggressive at the moment, but overall, I think Microsoft is an excellent long-term investment. Microsoft currently ranks Zacks #3 (Hold) with a VGM score of D.

Microsoft Corporation price chart-consensus-eps-surprise | Microsoft Corporation, Quote

Why not look at the top of Zacks stocks?

Our top five performing strategies wiped out the impressive +28.8% S&P gain in 2021. Surprisingly, they soared +40.3%, +48.2%, +67.6%, +94.4%, And + 95.3%. Today you can access their live selections without cost or obligation.

See free stock >>

Media connection

Zacks Investment Research

800-767-3771 ext. 9339

support@zacks.com

https://www.zacks.com

Past performance is not a guarantee of future results. Inherent in any investment is the potential for loss. This material is provided for informational purposes only and nothing herein constitutes an investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in the securities, companies, sectors or markets identified and described have been or will be profitable. All information is effective as of the date of this document and is subject to change without notice. Any opinions or opinions expressed may not reflect the views or opinions of the Company as a whole. Zacks Investment Research is not involved in investment banking, market making or asset management activities for any securities. These returns are from virtual portfolios consisting of shares of Zacks rank = 1 that are rebalanced monthly without transaction costs. These are not actual portfolio returns for stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance For information on the performance numbers presented in this press release.

Just Released: Top 7 Zacks Stocks for Today

Experts extracted 7 stocks from the list of 220 Zacks ranked #1 in strong buys that beat the market more than 2X with an impressive average profit of +25.4% per annum.

These seven were chosen because of their superior potential for instant penetration.

Watch these time-sensitive indicators now >>

Click for this free report

Amazon.com, Inc. (AMZN): Free Stock Analysis Report

Apple Inc. (AAPL): Free Stock Analysis Report

Microsoft Corporation (MSFT): Free Stock Analysis Report

Activision Blizzard, Inc (ATVI): Free Inventory Analysis Report

Alphabet Inc. (GOOGL): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

The opinions and opinions expressed here are those of the author and do not necessarily reflect the views and opinions of Nasdaq, Inc.

Leave a Comment

Your email address will not be published.