Amazon and the Alphabet have performed poorly so far, but some analysts have more than 40% upside in both stocks.
Amazon is a triple threat with a strong stance in e-commerce, digital advertising and cloud computing, and the company has been beating Wall Street’s revenue estimates.
Alphabet is a market leader in digital advertising and has gained market share in cloud services, but two antitrust lawsuits could force the company to break up.
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Shares Amazon(NASDAQ: AMZN) and letter(NASDAQ: GOOGL)(NASDAQ: GOOG) Despite the benchmark returns of 2%, it has dropped by several percentage points so far S&P 500(snpindex: ^gspc). However, some Wall Street analysts expect these stocks to earn considerable returns over the next 12 months, as described below:
Tigress Financial's Ivan Feinseth sets Amazon at a target price of $305 per share. This means its current share price is $212, which means 44% upside. This also means the market value is $3.2 trillion.
Paul Chew of Phillip Securities sets letters at a target price of $250 per share. This means its current stock price is $172 upside. This also means the market value is $3 trillion.
This is what investors know about Amazon and the alphabet.
Image source: Getty Images.
Amazon's investment papers center on its strong position in three growing markets. It is the most popular online market outside China, accounting for nearly 41% of retail e-commerce sales in the United States. Amazon is also the largest retail media company, collecting nearly 77% of domestic retail advertising spending and 40% of global retail advertising spending.
Finally, Amazon Web Services (AWS) is the largest public cloud with a market share of 29% in infrastructure and platform services. With more customers and partners than any other cloud platform, AWS is particularly capable of leveraging the growing demand for artificial intelligence (AI) infrastructure. The company leans towards this opportunity by developing custom chips for training and reasoning.
Importantly, Amazon is also using AI in its retail business to increase productivity and efficiency. CEO Andy Jassy said the company is developing about 1,000 generative AI tools to make warehouse robots smarter, improve inventory allocation and optimize delivery routes. These innovations, coupled with the ongoing restructuring of its logistics network, should increase retail profit margins in the coming years.
As a warning, Amazon may struggle with tariffs. Morgan Stanley It is estimated that 60% of sellers in the market will be exposed to China, and Chinese sellers are an important source of advertising revenue. Still, Andy Jassy believes that its diversified seller base will make the company “better than others.”
Wall Street expects Amazon's earnings to grow 10% annually by 2026. This makes the current valuation 34 times, which looks expensive. But analysts used to miss this mark. Amazon beat consensus estimates on average 21% over the past six quarters. Assuming this trend continues, the current share price is quite reasonable.
Here's the point: I don't believe Amazon stock will return 44% next year, but I still think that patient investors should have positions and now is a reasonable time to buy a few shares.
The investment papers of letters focus on a large number of opportunities in digital advertising and cloud services. That said, Alphabet is the largest advertising technology company on the planet, and digital advertising spending is expected to grow by 15% per year by 2030. Although Alphabet has lost market share for years, it still has the profound ability to enable Internet users to attract Internet users using platforms such as Chrome, Google Search and YouTube.
Similarly, while internet search is undoubtedly moving towards AI tools like chatgpt and confusion, letters have successfully leaned towards this trend. Generative AI overview in Google Search is driving higher usage and satisfaction. According to Sensor Tower, its generated AI application Gemini is the second largest AI chatbot to download last year.
Google is the third largest public cloud. It accounts for 12% of infrastructure and platform services spending in the first quarter, a percentage point higher than the previous year. Meanwhile, Amazon and Microsoft Lost share. Google may continue to outperform its peers due to the strength of large language models and AI infrastructure, which are two categories ForrestResearch The company has been recognized as a leader.
Importantly, Alphabet has a third major opportunity in autonomous driving technology. The industry is far less developed than digital advertising and cloud computing, but the global auto-ride ride-sharing market could exceed $2 trillion over the next decade. Evercore. Alphabet's Waymo was an early leader. Currently, it offers 250,000 drones per week in four U.S. cities, a five-fold increase from last year.
As a warning, the letters may depend on the outcome of two antitrust lawsuits that have evolved into remedial phases. A federal judge will propose a fix for an August illegal internet search monopoly, and another federal judge will rule its advertising technology monopoly on a future date. Most analysts believe that the probability of a forced breakup is small, but the probability is not zero.
With that in mind, Wall Street estimates that Alphabet's adjusted revenue will increase by 7% per year until 2026. This makes the current 19 times sales look a bit expensive. But over the last six quarters, the alphabet averaged outperformed consensus estimates beat 14% on average. If this trend continues, the current valuation will be reasonable.
Here's the point: If a judge makes a favorable ruling in an antitrust case, next year's letter stock will return 45% next year. But if any judge orders a breakup, the stock could also drop significantly. Investors can buy a small position today, but I'm going to wait for a clearer stake before getting a large stake.
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Alphabet executive Suzanne Frey is a member of the board of directors of Motley Fool. John Mackey, former CEO of Amazon's subsidiary Whole Foods Market, is a member of the board of directors of Motley Fool. Trevor Jennewine has a position on Amazon. Motley fool has a place and recommends letters and Amazon. Motley Fool has a disclosure policy.
