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Time to Buy the Recent Dip in Microsoft or Amazon's Stock?
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Markets stabilized today with the S&P 500 and Nasdaq rising 1% after a correction like selloff over the last week. As volatility fears start to settle Amazon (AMZN - Free Report) and Microsoft (MSFT - Free Report) are two big tech stocks investors may be eyeing for a rebound.
Despite giving back much of their lofty gains this year, Amazon and Microsoft’s stock are still up just over +7% in 2024 with both companies recently exceeding their quarterly earnings expectations.
Image Source: Zacks Investment Research
Cloud Comparison
Although they have different business models, Amazon and Microsoft compete as cloud providers. In fact, Amazon Web Services (AWS) is the largest cloud provider followed by Microsoft’s Azure cloud.
Reporting its Q2 results last Thursday, Amazon’s AWS segment sales spiked 18% to $26.28 billion while exceeding estimates of $25.86 billion by 1%.
Image Source: Zacks Investment Research
Meanwhile, Microsoft reported results for its fiscal fourth quarter last Tuesday with Azure helping the software titan bring in $28.51 billion for its Intelligent Cloud segment. This was a 19% leap from the comparative quarter but slightly missed estimates of $28.66 billion.
Image Source: Zacks Investment Research
Growth & Outlook
Amazon’s total sales are now expected to rise 10% in fiscal 2024 and are projected to increase another 11% in FY25 to $704.04 billion. On the bottom line, the e-commerce behemoth's annual earnings are slated to soar 62% this year to $4.70 per share versus EPS of $2.90 in 2023. Even better, FY25 EPS is expected to leap another 24% to $5.84.
Image Source: Zacks Investment Research
Pivoting to Microsoft, total sales are projected to be up 13% in its current fiscal 2025 and are forecasted to jump another 13% in FY26 to $314.8 billion. Furthermore, Microsoft’s EPS is expected to rise 10% in FY25 and is slated to expand another 15% in FY26 to $15.04.
Image Source: Zacks Investment Research
Valuation Comparison
After their recent pullbacks Amazon’s stock trades at 34.8X forward earnings with Microsoft at 30.3X. Trading at modest premiums to the S&P 500’s 21.8X forward earnings multiple, Amazon’s stock is at a nice discount to its five-year median of 71.8X with Microsoft slightly beneath its own median of 32X during this period.
Image Source: Zacks Investment Research
Bottom Line
At the moment, Amazon and Microsoft’s stock both land a Zacks Rank #3 (Hold). Recent market volatility does suggest there could be better buying opportunities for these tech leaders but their growth and more attractive valuations make them sound long-term investments especially when the smoke finaly clears.
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Time to Buy the Recent Dip in Microsoft or Amazon's Stock?
Markets stabilized today with the S&P 500 and Nasdaq rising 1% after a correction like selloff over the last week. As volatility fears start to settle Amazon (AMZN - Free Report) and Microsoft (MSFT - Free Report) are two big tech stocks investors may be eyeing for a rebound.
Despite giving back much of their lofty gains this year, Amazon and Microsoft’s stock are still up just over +7% in 2024 with both companies recently exceeding their quarterly earnings expectations.
Image Source: Zacks Investment Research
Cloud Comparison
Although they have different business models, Amazon and Microsoft compete as cloud providers. In fact, Amazon Web Services (AWS) is the largest cloud provider followed by Microsoft’s Azure cloud.
Reporting its Q2 results last Thursday, Amazon’s AWS segment sales spiked 18% to $26.28 billion while exceeding estimates of $25.86 billion by 1%.
Image Source: Zacks Investment Research
Meanwhile, Microsoft reported results for its fiscal fourth quarter last Tuesday with Azure helping the software titan bring in $28.51 billion for its Intelligent Cloud segment. This was a 19% leap from the comparative quarter but slightly missed estimates of $28.66 billion.
Image Source: Zacks Investment Research
Growth & Outlook
Amazon’s total sales are now expected to rise 10% in fiscal 2024 and are projected to increase another 11% in FY25 to $704.04 billion. On the bottom line, the e-commerce behemoth's annual earnings are slated to soar 62% this year to $4.70 per share versus EPS of $2.90 in 2023. Even better, FY25 EPS is expected to leap another 24% to $5.84.
Image Source: Zacks Investment Research
Pivoting to Microsoft, total sales are projected to be up 13% in its current fiscal 2025 and are forecasted to jump another 13% in FY26 to $314.8 billion. Furthermore, Microsoft’s EPS is expected to rise 10% in FY25 and is slated to expand another 15% in FY26 to $15.04.
Image Source: Zacks Investment Research
Valuation Comparison
After their recent pullbacks Amazon’s stock trades at 34.8X forward earnings with Microsoft at 30.3X. Trading at modest premiums to the S&P 500’s 21.8X forward earnings multiple, Amazon’s stock is at a nice discount to its five-year median of 71.8X with Microsoft slightly beneath its own median of 32X during this period.
Image Source: Zacks Investment Research
Bottom Line
At the moment, Amazon and Microsoft’s stock both land a Zacks Rank #3 (Hold). Recent market volatility does suggest there could be better buying opportunities for these tech leaders but their growth and more attractive valuations make them sound long-term investments especially when the smoke finaly clears.