The internet's rapid global growth fuels increased online activities such as e-commerce, social networking, and remote work tools, transforming it into an interactive platform that revolutionizes communication, work, shopping, and information access.
In the fast-paced world of tech stocks, 2024 holds immense potential for industry juggernauts Alphabet Inc. (GOOGL) and Amazon.com, Inc. (AMZN). Approaching the remarkable $2 trillion market cap milestone, both stocks offer enticing prospects for investors, signaling a promising path ahead for the year.
As Internet usage continues to rise, consumer preferences are shifting towards online transactions. Projections indicate that the e-commerce industry will surge to a substantial $8.80 trillion this year, with further remarkable growth anticipated to reach $18.81 trillion by 2029, boasting a notable 15.8% CAGR.
Further, the ongoing surge in AI adoption is proving lucrative for tech firms. The global artificial intelligence market is expected to reach $305.90 billion this year and grow at a CAGR of 15.8%, resulting in a market volume of $738.80 billion by 2030. Given their strong presence in the AI sector, this growth presents significant opportunities for GOOGL and AMZN.
Now, let's delve into their fundamentals, showcasing the bullish trends of these Internet titans:
Stock #2: Alphabet Inc. (GOOGL)
With a staggering market cap of $1.99 trillion, GOOGL is the powerhouse behind a spectrum of tech innovations and platforms worldwide. Its segments, spanning Google Services; Google Cloud; and Other Bets; cater to diverse digital needs and aspirations.
On April 11, 2024, at Google Cloud Next 2024, GOOGL announced new AI-powered tools for Google Workspace aimed at boosting workplace productivity. The company also revealed that Gemini 1.5 Pro was now in public preview with the world's largest context window. At the same time, Imagen 2.0 could be used to create short live images from text prompts and offer image editing features.
On April 9, GOOGL unveiled an Arm-based data center processor and a new version of its AI chips. The Arm-based central processor, named Axion, promises superior performance compared to x86 chips and general-purpose Arm chips in the cloud.
The Axion chip offers 30% better performance than "general-purpose Arm chips and 50% better performance than current generation x86 chips produced by chip giants in the market. The company also introduced the TPU v5p chip, which boasts double the performance of its predecessor and is designed to run in pods.
During the fourth quarter, which ended December 31, 2023, GOOGL saw robust growth, with revenues rising 13.5% year-over-year to $86.31 billion. Income from operations surged by 30.5% from the year-ago quarter to $23.70 billion, while net income soared to $20.69 billion, marking a 51.8% increase from the prior year's quarter. Earnings per share for Class A, B, and C stock reached $1.64, up by 56.2% year-over-year.
Sundar Pichai, CEO, said: “We are pleased with the ongoing strength in Search and the growing contribution from YouTube and Cloud. Each of these is already benefiting from our AI investments and innovation. As we enter the Gemini era, the best is yet to come.”
Analysts expect GOOGL’s revenue for the first quarter (ending March 2024) to increase 12.7% year-over-year to $78.66 billion, and its EPS is expected to grow 28% year-over-year to $1.50. Moreover, the company has surpassed the consensus EPS and revenue estimates in each of the trailing four quarters, which is impressive.
The stock has gained 51.3% over the past year and 15.8% over the past month, closing the last trading session at $159.41. It is currently trading above its 50-day and 200-day moving averages of $144.81 and $136.06, indicating an uptrend.
GOOGL’s POWR Ratings reflect its promising outlook. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
The stock has a B grade for Sentiment and Quality. Within the B-rated Internet industry, GOOGL is ranked #11 out of 53 stocks.
In addition to the POWR Ratings just highlighted, one can access GOOGL’s ratings for Growth, Value, Stability, and Momentum here.
Stock #1: Amazon.com, Inc. (AMZN)
Boasting a market cap of $1.97 trillion, AMZN operates both online and in physical outlets, sells consumer products, and offers advertising and subscription services. It functions across three segments: North America; International; and Amazon Web Services (AWS).
On April 10, it was reported that AMZN had launched Bazaar, a low-price marketplace in India offering affordable fashion and home products. With this move, AMZN aims to tap India's growing low-cost retail market.
On March 18, AMZN’s AWS revealed a partnership with NVIDIA Corp. (NVDA), introducing the latest NVIDIA Blackwell GPU platform to its services. This collaboration brings the GB200 Grace Blackwell Superchip and B100 Tensor Core GPUs to AWS, boosting its generative AI capabilities.
By combining AWS's advanced infrastructure with NVIDIA's GPU technology, customers gain access to faster, scalable, and cost-effective solutions for real-time inference on large language models.
During the fourth quarter that ended December 31, 2023, AMZN’s total net sales increased 13.9% year-over-year to $691.96 billion. The company’s operating income grew 382.6% from the year-ago value to $13.21 billion. In addition, the company’s net income and EPS came in at $10.62 billion and $1, up 3721.6% and 3233.3% from the prior year’s quarter, respectively.
Its total assets stood at $527.85 billion as of December 31, 2023, compared to $462.67 billion as of December 31, 2022.
The company expects net sales to range between $138 billion and $143.50 billion in the first quarter ending March 2024, representing an 8% to 13% growth compared to the first quarter of 2023. Operating income is projected to fall between $8 billion and $12 billion.
Analysts project AMZN’s EPS to rise 173.9% year-over-year to $0.85 in the fiscal first quarter that ended March 2024. Its revenue is expected to improve 12% from the previous-year quarter to $142.59 billion in the same quarter. Moreover, the company topped the consensus revenue and EPS estimates in all of the trailing four quarters.
The stock gained 21.8% over the past three months and 89.2% over the past year to close the last trading session at $189.05. It is currently trading above its 50-day and 200-day moving averages of $175.33 and $148.13.
AMZN’s rosy fundamentals are apparent in its POWR Ratings. The stock has an overall rating of B, which equates to Buy in our proprietary rating system.
AMZN has an A grade for Growth and a B for Momentum, Sentiment, and Quality. It is ranked #5 in the same industry.
Click here to access additional AMZN ratings for Value and Stability.
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
GOOGL shares were trading at $157.65 per share on Friday afternoon, down $1.76 (-1.10%). Year-to-date, GOOGL has gained 12.86%, versus a 7.63% rise in the benchmark S&P 500 index during the same period.
About the Author: Kritika Sarmah
Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.
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