The Nasdaq has surged to record levels in early trading, signaling a pivotal period for Wall Street. Big tech players like Alphabet, Microsoft, Apple, Amazon, and others are slated to announce their financial results in the coming weeks, closely followed by the looming presidential election on November 5.
The strength of the bulls at the Nasdaq’s 21-day moving average has been a hallmark of this year. Additionally, Tesla’s stock witnessed a significant uptick after its recent earnings report, while Taiwan Semiconductor’s mention of robust artificial intelligence (AI) spending further solidified market sentiment.
Today’s episode of Full Court Finance at Zacks delves into the current state of the stock market as it braces for a flurry of tech sector earnings releases and the impending presidential election.
Investing in Meta Stock: Unveiling AI Growth Potential
Meta Platforms, Inc. (META) is gearing up to disclose its Q3 2024 earnings performance on Wednesday, October 30. The company’s trajectory aligns with the relentless pursuit to engage consumers with digital advertising in an era dominated by smartphone usage.
Meta experienced a 7% increase in daily active users across its platforms, including Facebook, Instagram, and WhatsApp, reaching 3.27 billion in Q2. Enhanced ad impressions and pricing, both up by 10%, underscored the company’s growth.
Mark Zuckerberg’s plunge into open-source AI sets Meta apart in the AI landscape. The market’s enthusiasm for Meta lies in its robust AI growth, backed by a solid balance sheet and sustained expansion across core businesses. A significant majority of the 48 brokerage recommendations from Zacks rate Meta as a “Strong Buy.”
Despite soaring 60% year-to-date and a staggering 345% surge in the past two years, Meta trades at a 10% discount to the Zacks tech sector and 70% below its previous highs, with a forward 12-month earnings multiple of 23.9X.
The growth trajectory indicates a 20% rise in revenue for 2024, followed by a 14% increase next year. Adjusted earnings are projected to surge by 44% and 13% for the respective periods, positioning Meta as a Zacks Rank #2 (Buy) pick, coupled with its dividend-paying status.
Delving into Amazon Stock: Preparing for Potential All-Time Highs
Amazon (AMZN) is scheduled to unveil its Q3 2024 earnings outcomes on Thursday, October 31. Over the past decade, Amazon has witnessed a jaw-dropping 1,100% surge, outpacing Tech’s 333%, Apple’s 770%, and Alphabet’s 500%. Despite this, its 25% year-to-date climb pales in comparison to Meta and other tech giants.
Renowned for its dominance in e-commerce, Amazon’s stock has shown resilience around its 21-week moving average and historical peaks. Awaiting upbeat guidance, the stock is poised for a potential breakout from its recent consolidation phase.
Trading 95% below its highs and at a 50% markdown from its 10-year median, Amazon boasts a forward 12-month earnings multiple of 32.9X. Its PEG ratio, reflective of long-term earnings growth, is 25% lower than the broader tech sector at 1.2.
Amazon’s commanding presence in the U.S. e-commerce market, capturing nearly 40% share compared to Walmart’s 7%, underscores its market dominance. Furthermore, its robust cloud computing division and surging digital advertising segment signal promising prospects.
The company’s razor-sharp focus on higher-margin segments like AWS and advertising, coupled with a drive for operational efficiency, underpin its earnings growth trajectory. Reports suggesting an ambitious $100 million investment agenda further solidify Amazon’s position in the tech market.
The Data Drive: Amazon’s Billion-Dollar Bet on AI Expansion
Amazon’s Major Investment
Amazon, the e-commerce giant, is making significant strides in the technology sector with an ambitious plan to invest billions over the next decade in data centers. This hefty investment is aimed at turbocharging its artificial intelligence (AI) expansion efforts, positioning the company for exponential growth in this rapidly evolving landscape.
Financial Projections
Analysts are optimistic about Amazon’s future growth trajectory. Projections show that the tech behemoth is set to increase its adjusted earnings by a staggering 64% in 2024, followed by another 23% surge the following year. This remarkable growth is expected to propel Amazon’s earnings per share from $2.90 in FY23 to an impressive $5.84 by the next fiscal year.
Moreover, in the realm of sales, Amazon is forecasted to witness a 10% growth in FY24 and an additional 11% the subsequent year. These projections translate to an estimated $130 billion increase in the company’s top-line revenue over the span of just two years.
Strategic Focus on AI
Amazon’s strategic focus on bolstering its AI capabilities through substantial investments in data centers underscores the company’s commitment to staying ahead of the curve in the fiercely competitive tech landscape. This move not only enhances Amazon’s technological prowess but also solidifies its position as a frontrunner in the AI domain.
Historical Context
This monumental investment by Amazon harks back to a historical narrative where industry giants have consistently poured resources into cutting-edge technology to drive innovation and maintain relevance. Just as pioneers of the past embraced innovation to thrive in their respective eras, Amazon’s latest endeavor symbolizes a modern-day quest for technological dominance.
Conclusion
As Amazon navigates the ever-evolving tech terrain, its substantial investment in data centers for AI expansion signifies a bold step towards shaping the future of technology. With promising financial projections and a strategic focus on AI, Amazon is poised to solidify its position as a tech powerhouse in the years to come.