How do Apple Inc. (NASDAQ:AAPL) and Amazon.com, Inc. (NASDAQ:AMZN) measure up as titans of the tech-verse after delivering their respective quarterly prints? Gene Munster – allotting insights from his new research-driven, venture capital firm Loup Ventures – sees the writing on the wall pointing to a new era where major augmented reality and artificial intelligence will take precedence.
Apple’s advantages lie clearly in its upcoming 10th anniversary iPhone launch, its robust Services segment, and its AR-driven long-term pathway for success. Therefore, the analyst remains unconcerned by any temporary stalls in iPhone revenue. Meanwhile, as Amazon keeps laying the stones to capture top spot on the leaderboard for artificial intelligence and machine learning, Munster is rooting for the stock’s success. Let’s explore:
Apple’s Great AR Evolution
When it comes to Apple, Munster recognizes another great metamorphosis in the mix. Considering this is an analyst whose repute has been built over the years by putting all his chips in on the tech giant’s success even before the first iPhone circled its way ten years ago, the analyst has observed various revolutions transpire along the way. Every decade or so, the tide changes for Apple, first serving the PC, ten years later making a transition to the interwebs, and its most recent millennial era: the smartphone. What’s next? Munster’s money is on augmented reality-driven computing.
Apple posted earnings Tuesday that reflected a “pause” in iPhone revenue. Munster explains, “Judging by the mild negative reaction of the stock in after-market trading, it appears that investors are focused on the coming iPhone X product cycle and beyond. We agree with the market that a bet on shares of AAPL is a bet on the company’s ability to transition from their existing iPhone platform to an augmented reality-driven platform in the future.”
Another domino laying the pathway for Apple’s grand shift in the making is its Services segment, showcasing a “solid” performance with $7.0 billion, just under the analyst’s forecast of $7.1 billion. This is even withstanding the giant’s delivery of 50.8 million iPhone units, well under the analyst’s expectations for 54.8 million. To Munster, this reflects true “resilience” for the business.
Moreover, the analyst believes, “We expect shares of AAPL to move higher in anticipation of announcements at WWDC in June along with growing optimism around the iPhone X this fall. Separately, the Jun-17 quarter has been de-risked with the just-issued conservative guidance. Fast forwarding to the end of the summer, we expect shares of AAPL to be range bound as optimism around the potential of the iPhone X driving 5-10% y/y unit growth will slowly be replaced by anxiety about the iPhone X tail in Mar-18 and Jun-18.”
Ultimately, Munster continues to staunchly back his favorite stock, surmising, “We remain optimistic that Apple will be a significant player in the shift to AR-driven computing, and potential growth from Apple’s car project will represent option value.”
TipRanks analytics show AAPL as a Strong Buy. Out of 32 analysts polled by TipRanks in the last 3 months, 25 are bullish on Apple stock, 6 remain sidelined, and 1 is bearish on the stock. With a return potential of nearly 8%, the stock’s consensus target price stands at $158.33.
Amazon Continues to Pave Way for AI-Heavy Future
Last Thursday, Amazon posted earnings that to Munster further reveals the online auction and e-commerce leader’s focus on artificial intelligence as well as machine learning. Amazon CEO Jeff Bezos has made this new prioritization clear, as he hopes to not only foster greater operational efficacy both within the company as well as reaching out to Amazon Web Services (AWS) consumers.
“On a smaller scale, the beta Amazon Go store in Seattle is one of several competing visions for the future of retail,” notes Monster, elaborating that in jumping on the computer-vision-meets-sensor-fusion-meets-deep learning train, Amazon Go is ideal in offering a “checkout-less shopping experience” for customers.
Additionally, the analyst predicts, “With Bezos indicating a ‘doubling-down’ on investment in Alexa and Echo last night, we expect Amazon and Google to remain head-to-head for leadership in the digital assistant market.”
Looking ahead, the long-term path looks promising for Amazon from the research analyst’s eyes. “Echo Look shows us what screen-less computing will look like in the future and, at the same time, how early we are in the transition. Amazon is pushing speech-driven computing faster and further, but the Echo Look also reminds us that we’re in the first inning of devices that will be increasingly commonplace as the next computing paradigm emerges. Adding cameras, sensors, computing power, skills and form factors to devices like the Echo product line will dramatically improve the utility of the category and drive adoption. Clearly, Amazon gets it and is determined to lead the way,” concludes Munster.
TipRanks analytics indicate AMZN as a Strong Buy. Based on 30 analysts polled by TipRanks in the last 3 months, 27 rate a Buy on Amazon stock while 3 remain sidelined. The 12-month average price target stands at $1,081.58, marking a nearly 15% upside from where the stock is currently trading.