Is it a good idea to buy Google & Microsoft shares now?
Earnings season Q3 is lifting markets and already we’ve seen a major winner in the form of Netflix shares soaring. Unfortunately, not every company will meet its targets, as was the case with Tesla Motors earlier in October.
This week some of the world’s biggest tech companies are releasing their third-quarter earnings including Microsoft, Google, Apple, and Amazon.
Today, we look at two titans of the tech industry, Microsoft and Google, to find out whether each stock is a buy, sell or hold?
Google – digital advertising could affect profits
The 2020 pandemic has forever changed many industries. One of which has been irreparably damaged and that’s digital advertising. Once the primary source of revenue for many of the world’s biggest platforms in 2022, it has been dismal here for advertisers and revenue remains below pre-2020 levels.
Why is this important for Google? Online advertising is the primary source of revenue for Alphabet, Google’s parent company. Advertising will be key to Google’s Q3 report and to show the future of the company. Since 2020, Google has invested heavily in cloud-based services to make up for the drop in traditional advertising.
Analysts will be focusing on search ad sales, cloud revenue, and stronger growth from YouTube.
The consensus on Wall Street is that Google is the best bet among tech companies. Google’s dominance in search is ironically causing it headaches with regulators and lawmakers. The company has come under major scrutiny and suffered lawsuits for breach of privacy and data collection.
Regulatory pressures continue to plague Google; In October 2022, Google was fined $161.95 million for anti-competitive practices by the Competition Commission of India. In the same month, Texas Attorney General Ken Paxton filed a lawsuit that claimed Google collected biometric data from millions of Texans without proper consent.
Analyst consensus: Buy
Forecast: $71.34 billion
Earnings Per Share: $1.28
Market cap: $1.34 trillion
The average price target is $139.00 with a high forecast of $150.00 and a low forecast of $130.00
The average price target represents a 35.17% Increase from the last price of $102.83.
Based on 6 analysts offering 12-month price targets for GOOGLE in the last 3 months.
Analyst consensus: Negative
Based on a formula that combines this week’s News Sentiment and Media Buzz
Microsoft – PC slowdown
Back in 2020, Microsoft saw a boom in revenue as home PC sales soared. In 2022 however, Microsoft is set to post its slowest quarterly revenue growth in over five years on October 25. Many analysts believe a slowdown in the PC market and a strong dollar are negatively affecting the company.
As inflation soars in 2022, many consumers and businesses are reluctant to spend on computers and laptops. This is having a severe effect on Microsoft’s key products, namely Windows operating system and the company’s Office suite. Windows licenses account for about 12% – 13% of Microsoft’s revenue.
The dollar has climbed more than 17%, and while it increases buying power for US consumers, Microsoft earns more than 50% of its revenue outside the United States. A strong dollar makes it prohibitively expensive to import US goods; PC shipments have declined by 19.5% in Q3 this year, reports research firm Gartner.
At least 15 brokerages lowered their price targets for the software giant in October. Like many tech companies, Microsoft’s shares have declined by more than a quarter in 2022.
The downturn in PC sales has been offset by Microsoft’s cloud services unit Azure, which is set to grow by 20%. Microsoft Teams has also become the default solution for remote working.
Analyst consensus: Buy
Forecast: $49.86 billion
Earnings Per Share: $2.32
Market cap: $1.84 trillion
The average price target is $315.36 with a high forecast of $411.00 and a low forecast of $275.00
The average price target represents a 27.69% Increase from the last price of $246.98
Based on 31 analysts offering 12-month price targets for MSFT in the last 3 months
Analyst consensus: Neutral
Based on a formula that combines this week’s News Sentiment and Media Buzz.
Markets rise on earnings
European stocks rose on Oct 25 after many companies reported better-than-expected earnings reports. The positive outlook in stocks offset worries about rising interest rates and a slowing global economy.
The pan-European STOXX 600 index (.STOXX) rose 0.3%, with financial services (.SXFP) and technology (.SX8P) stocks rising in value.
Overall, the quarterly updates in October have raised sentiment despite concerns about a European recession
Of the 20% of STOXX 600 companies that have reported third-quarter results so far, 55% have beaten analysts’ profit estimates, as per Refinitiv IBES data. US stocks rose in choppy trading on Oct 25 as Wall Street prepares for a week of third-quarter earnings results for Big Tech companies, including Meta, Alphabet and Amazon.
Wall Street’s S&P 500 was up 0.8%, recording its biggest five-session gain since June, adding 4.7%.
More company earnings are on the way
The October earnings season is in full swing and many of the world’s biggest companies will report their results, creating major trading opportunities. These stocks are sure to cause market volatility, creating trading opportunities you can’t afford to miss.
Check out the list below for some of the top stocks you shouldn’t miss.
Full list of top stocks: Forecast and market cap
Tuesday, October 25, 2022
Alphabet A (GOOGL) 71.34B / 1.29T
Twitter Inc (TWTR) 1.29B / 37.58B
Wednesday, October 26, 2022
Microsoft (MSFT) 49.86B / 1.75T
Meta Platforms (META) 27.58B / 358.65B
Thursday, October 27, 2022
Apple (AAPL) 88.73B / 2.25T
Amazon.com (AMZN) 127.76B / 1.17T