Recently, Goldman Sachs analyst Eric Sheridan named Amazon as the top e-commerce pick, anticipating strong trends in the sector for the first quarter. Sheridan maintained a buy rating and a $220 price target on Amazon, which implies a potential upside of about 26% for the stock. The analyst highlighted resilient consumer spending in the first quarter as a key driver of his bullish sentiment on Amazon. Additionally, industry research and third-party data sources supported his positive outlook on the e-commerce giant.
Sheridan identified several factors behind his bullish rating on Amazon. He pointed out that consumer demand levels remain robust in the retail business and that AWS revenue is expected to reaccelerate in the first quarter and throughout 2024. The growth in cloud migrations and the increasing contribution from AI workloads are expected to drive this revenue growth. Furthermore, strong momentum and secular tailwinds are anticipated to lead to solid advertising revenue growth for Amazon.
Moreover, Sheridan highlighted the expected “residual upside” to Amazon’s North America margins. He believes that the company will benefit from an increasingly efficient logistics network and operating leverage, which should support margin expansion. However, the analyst remains cautious on the sector for 2024 due to the wide dispersion of expected results from tech companies.
Morgan Stanley Cuts Apple’s Price Target
In contrast to Goldman Sachs’ optimism on Amazon, Morgan Stanley recently cut its price target on Apple from $220 to $210. Analyst Erik Woodring reiterated his overweight rating on the tech giant but revised his price target downwards. The new target implies a potential upside of 27.3% over the next 12 months.
Woodring acknowledged that Apple’s fiscal second-quarter report is expected to be decent but not exceptional. He anticipates that the company will slightly beat the consensus revenue and earnings per share estimates for the March quarter, driven by stable product demand and outperformance in services. However, the analyst expects Apple to provide guidance for the June quarter that is closer to his estimate of $80 billion, compared to the higher consensus estimate of $83.5 billion.
Furthermore, Woodring noted that there is a similar earnings setup to three months ago, with the expectation of slight revenue upside for the March quarter but a potentially significant guide-down for the June quarter relative to consensus estimates. He warned that such a scenario could lead to a negative market reaction, especially considering that Apple’s shares have already declined by 14% in recent months, underperforming other major tech companies.
Overall, the contrasting views of Goldman Sachs and Morgan Stanley on Amazon and Apple reflect the varying perspectives in the financial markets. While one firm is bullish on the e-commerce sector and a specific tech company, another is more cautious about the outlook for a leading tech giant. Investors will need to carefully evaluate these divergent opinions and consider the potential implications for their investment decisions.