Analysts Spotlight Buying Opportunity in Apple Inc. (AAPL) and, Inc. (AMZN)

Analysts see reason to be enthusiastic in the tech world today thanks to a robust quarterly showing by Apple Inc. (NASDAQ:AAPL) and a new centralized air hub in the works from, Inc. (NASDAQ:AMZN).

Two analysts outline reasons why Apple remains a hot stock to buy, even in face of investor concerns regarding the interim before the iPhone X hits the market. Meanwhile, one of Wall Street’s best-performing analysts sees more than just ocean freight-forwarding sights set when it comes to Amazon, predicting this move could domino into a massively profitable opportunity.

Let’s dive in:

Apple’s Risk/Reward Shines Amid Investor Anticipation for iPhone X

Apple released its fiscal first quarter earnings for 2017 yesterday evening, exciting investors and subsequently sending shares on a 6% rise. In reaction, BMO analyst Tim Long makes a confident case for the tech giant, reiterating an Outperform rating on shares of AAPL while raising the price target from $135 to $142, which represents a just under 11% increase from where the stock is currently trading.

For the first fiscal quarter, the giant generated a “solid” beat, with revenue that hit $78.4 billion, compared to consensus of $77.3 billion. Long had slightly higher expectations of $78.5 billion, but still considers Apple as having hit a “new peak.” As far as EPS, Apple’s robust result of $3.36 strongly outperformed both consensus of $3.22 as well as the analyst’s expectation of $3.27. Gross margin was “in line” with Long’s projection, although operating expenses did not do quite as well as he had modeled.

Though the analyst finds guidance for the next quarter “mixed” and “a little less impressive” than the rest of the print, he notes, “we believe sentiment will depend more on potential tax reforms and the assumed September iPhone refresh. Management wants to double Services revenue in four years, which represents nearly twice the rate of growth we had been modeling.”

Apple’s iPhone shipments of 78.3 million topped the Street’s forecast of $77.0 million, but hit just under the analyst’s estimate of 80.0 million units. Long adds, “ASP of $700 beat our/ consensus estimates of $679/$687, owing to product mix and demand for the iPhone 7 Plus.” For the second fiscal quarter of 2017, the analyst configures a forecast of 52 million units, which falls below his initial estimate of 55 million as well as consensus of 53 million, noting, “We expect focus will be on assumptions for the September iPhone refresh rather than near-term units, however.:

Ultimately, Long expects Apple’s success all comes down to services, which are “going strong,” as he concludes, “Services continue to be an important part of the story, as continued App Store growth helped drive 21% like-for-like Services growth. We have been expecting strength here, owing to the growing installed base of new and used iPhones. Management expects the revenue contribution from Services to double in four years, which represents nearly twice the growth rate we had been modeling.”

According to TipRanks, which measures analyst’s and bloggers’ success rate based on how their calls perform, four-star analyst Tim Long is ranked #527 out of 4,373 analysts. Long has a 60% success rate and realizes 7.6% in his annual returns. When suggesting AAPL, Long yields 15.6% in average profits on the stock.

Piper Jaffray analyst Michael Olson is likewise bullish on Apple stock after its earnings, even more so than Long, reiterating an Overweight rating on AAPL with a price target of $155, which represents a 21% increase from where the shares last closed.

Olson continues to see excellent opportunity in the shares, praising, “We remain buyers of AAPL due to our expectation for growing anticipation around iPhone X (aka iPhone 8) and a favorable trajectory for services revenue. While some may be concerned that March & June quarter iPhone estimates may prove aggressive, we do not expect unit weakness and believe a near-term iPhone unit miss would be overshadowed by investor anticipation for iPhone X (Sept), providing a favorable risk/reward.”

Of course, the analyst recognizes there are some on the street who highlight concerns regarding the near-term picture of iPhone units leading up to the 10th anniversary edition. Yet, to Olson, these concerns appear “overblown,” as he explains, “With the December quarter iPhone units coming in ahead of expectations, investor concerns have hopefully been eased. We believe most consumers are not aware of the potential for a more significant upgrade coming in the fall, due to the 10th anniversary of the device and will, therefore, not hold back on upgrading now.”

Overall, the reward outweighs the risk for Apple as far as Olson sees it, carried by the buzz of the iPhone X, and will continue to be at least through the upcoming quarters. On back of the momentum of the quarter’s record highs,”[…] if Apple meets March quarter estimates, we think AAPL shares are positioned to run into the Fall ’17 launch of the 10th anniversary device,” Olson surmises, anticipating future beats from the iPhone.

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, five-star analyst Michael Olson is ranked #139 out of 4,373 analysts. Olson has a 63% success rate and gains 11.8% in his annual returns. When rating AAPL, Olson secures 2.8% in average profits on the stock.

TipRanks analytics exhibits AAPL as a Strong Buy. Based on 33 analysts polled by TipRanks in the last 3 months, 28 rate a Buy on AAPL stock while 5 maintain a Hold. The 12-month average price target stands at $140.26, marking a nearly 16% upside from where the stock is currently trading.

New $400 Billion Plus Market Opportunity for Amazon

Top analyst Colin Sebastian at Baird is chiming in with a positive take on Amazon after the online and e-commerce leader announced its new centralized air hub at the Cincinnati/Northern Kentucky Airport (CVG). In light of the new air cargo hub, which the analyst believes “underscores [Amazon’s] commitment to logistics build-out,” he reiterates an Outperform rating on shares of AMZN with an $850 price target, which represents a close to 3% increase from current levels.

Sebastian opines, “The company will be utilizing the new hub (breaking ground later this year) to support continued fast growth in the core Retail segment, and in particular, to help expand the selection and availability of Prime-eligible items.”

Furthermore, the analyst sees transformative prospects in the hub, adding, “[…] we believe Amazon’s air cargo/logistics investments could evolve into third-party services over time.”

Looking ahead, “While we understand the skepticism surrounding the potential of third-party logistics, precedent suggests Amazon has larger ambitions beyond the ATSG and Atlas Air announcements, and the magnitude of the CVG hub investment further strengthens that view. Moreover, we estimate a $400 billion+ market opportunity for Amazon in delivery, freight forwarding, and contract logistics, of which even a small slice could prove material for Amazon,” Sebastian contends.

Sebastian has a very good TipRanks score with a 76% success rate and a high ranking of #16 out of 4,373 analysts. Sebastian garners 17.6% in his yearly returns. When recommending AMZN, Sebastian earns 37.1% in average profits on the stock.

TipRanks analytics demonstrate AMZN as a Strong Buy. Out of 25 analysts polled by TipRanks in the last 3 months, 25 are bullish on Apple stock and 1 remains sidelined. With a return potential of 14%, the stock’s consensus target price stands at $941.72.

More stocks covered by top performing analysts can be found here.

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