The tech-verse is brimming with anticipation for a double-earnings release tonight for two of its leading giants, Amazon.com, Inc. (NASDAQ:AMZN) and Alphabet Inc (NASDAQ:GOOGL). Why are Guggenheim and RBC Capital decidedly positive on both companies ahead of the prints? Let’s delve a little deeper:
Ahead of Amazon’s third-quarter results tonight, Guggenheim analyst Robert Drbul remains bullish on the online auction and e-commerce leader with expectations for a revenue surge forward and accelerated growth from Amazon Web Services (AWS).
As such, the analyst reiterates a Buy rating on AMZN with a price target of $950, which represents a nearly 16% increase from where the shares last closed.
For the third quarter, Drbul project a 28% year-over-year rise in revenue to $32.40 billion, on back of sustained robust performance in North America, which has grown approximately 26%, coupled with a 55% step up in the “fast-growing AWS segment.” Drbul expects AWS to bring forth $3.2 billion in revenue, thanks to rising IT approval of the public cloud paired with data spending expansion this year.
The analyst notes, “We also expect the recent strength in International to continue as the Prime flywheel gathers steam in key markets (est. +24% growth).”
Drbul is modeling a global 30% year-over-year boost in AMZN’s E&GM segment to hit above $23 billion this quarter, “as Prime membership continues to swell.” Additionally, the analyst opines, “We expect improved selection, investments in content, and expansion of same-day/1-2 hour delivery to drive growth.”
From the analyst’s eyes, over 20% of growth in the first half of 2016 as well as three profitable quarters in a row are proof of the Prime flywheel “materializing in key International markets,” such as the UK, Germany, and Japan.
Moreover, Drbul contends, “With Prime membership growth outpacing the U.S., we believe efforts to improve selection, as well as investments in content and fulfillment (Prime Now added to Germany, France, and Spain in 2Q), are paying off.”
“As we look ahead, we expect revenue growth to remain above 20%, with broad strength, and remain comfortable with our FY16 and FY17 EPS estimates of $5.90 and $10.60, respectively. Importantly, we expect profitability will continue to improve despite increased investments in fulfillment, content, and AWS,” Drbul concludes.
According to TipRanks, which measures analysts’ and bloggers’ success rate, five-star analyst Robert Drbul is ranked #164 out of 4,197 analysts. Drbul has a 66% rate and gains 12.7% in his yearly returns. When recommending AMZN, Drbul garners 41.0% in average profits on the stock.
TipRanks analytics exhibit AMZN as a Strong Buy. Based on 34 analysts polled in the last 3 months, 33 rate a Buy on AMZN, while 1 maintains. The consensus price target stands at $941.76, marking just under a 15% upside from where the stock is currently trading.
Alphabet has RBC Capital top analyst Mark Mahaney‘s confidence in a preview of its third-quarter report, reiterating an Outperform rating on shares of GOOGL with a $1,025 price target, which represents a 25% increase from current levels.
For the third quarter, Mahaney models gross revenue of $22.46 billion, net revenue of $18.36 billion, non-GAAP operating income of $7.55 billion, and non-GAAP EPS of $8.81. The analyst notes that his gross revenue estimate outreaches the Street’s $22.09 billion estimate as well as his net revenue projection topping consensus of $17.98 billion. Moreover, Mahaney’s non-GAAP operating income reaches ahead of the Street’s $7.44 billion as does his non-GAAP EPS estimate, over consensus of $8.62.
The analyst affirms based on his advertising professional survey research results, “Google continued to be the largest platform for Online advertising dollars and future intents to spend on skewed positively.”
For Core Google gross revenue, Mahaney anticipates a 20% year-over-year rise to $22.3 billion as well as a 21% year-over-year reported increase to net revenue of $18.2 billion. Moreover, for Core Google non-GAAP operating profit, the analyst expects a 48% margin on net revenue of $8.7 billion, “as we believe the company’s improved cost focus could drive margin expansion.”
With regards to revenue and operating loss trends for Other Bets, the analyst expects $196MM in Other Bets revenue coupled with a non-GAAP operating loss of $1,006MM, a certain boost from this quarter last year’s loss of $875MM.
Mahaney indicates, “In Q2:16, we saw Paid Click growth of 29% Y/Y. On a 5pt tougher comp, we believe this decelerates in Q3 to 24% Y/Y.”
As to share buybacks, “In Q2, GOOGL fully completed their authorized repurchases, but did not announce a new plan. We would be surprised if Google did not announce a new share repo plan before the end of 2016,” Mahaney concludes.
As usual, we like to include the analyst’s track record when reporting on new analyst notes to give a perspective on the effect it has on stock performance. According to TipRanks, top five-star rated analyst Mark Mahaney has achieved a high ranking of #3 out of 4,188 analysts. Mahaney upholds a 70% success rate and realizes 20.4% in his annual returns. When recommending GOOGL, Mahaney yields 38.7% in average profits on the stock.
TipRanks analytics demonstrate GOOGL as a Strong Buy. Based on 32 analysts polled in the last 3 months, 31 rate a Buy on GOOGL, while 1 issues a Sell. The 12-month price target stands at $949.81, marking a 16% upside from where the shares last closed.