Call it a changing of the guard within Big Tech.
Amazon.com Inc.
AMZN,
and Apple Inc.
AAPL,
each reported earnings Thursday, and those results prompted Rosenblatt Securities analyst Barton Crockett to change his tune on both names. He upgraded Amazon’s stock to buy from neutral after earnings, while making the reverse move on shares of Apple.
“Our past concerns — that consensus views were too optimistic — have abated,” Crockett said of Amazon. “As the business resets, with efficiency a new focus for retail, and AI an emerging driver in cloud, the risk of impending economic headwinds looks less worrying, opening the door to higher multiple consumer growth stories.”
Amazon shares were up 10.7% in morning trading Friday and on track for their largest single-day percentage gain since Nov. 10, 2022, when they rose 12.2%, according to Dow Jones Market Data.
Crockett highlighted a bottoming of the AWS cloud-computing business as well as opportunities for Amazon to cash in on the wave of interest in generative artificial intelligence here.
See also: The ‘stabilization’ of AWS may have been the most significant number for Amazon’s earnings
“Generative AI is not yet material, and Microsoft and Google are early brand leaders courtesy of Bard and ChatGPT,” Crockett wrote. “But Amazon’s scale and history of selling machine learning services, and its investments in core capabilities including custom inferential and training chips, and large language models, argue that it can participate in a rising tide lifts all meaningful boats capacity, if generative AI sparks a new growth phase in the cloud sector.”
Read: Apple’s Tim Cook explains why he won’t showboat around AI
Meanwhile, he’s encouraged by better margin performance within the North America retail business, helped by a greater focus on regionalization.
“Faster delivery speed and better inventory placement means fewer miles traveled, fewer touches and less cost,” he wrote, as he boosted his price target to $184 from $111.
As for Apple, Crockett worries that the company needs more than just the iPhone to power performance going forward, and it’s not clear when or if a “material new product category” will start to contribute. The company “has a steady drumbeat
of upgrades and enthusiasts, but little reason to expect a big boom in the core iPhone.”
Apple’s stock was down 3.1% in Friday morning activity and on pace to record its steepest one-day drop in seven months.
“Even with an emerging-markets outperformance theme, Apple shares we believe could be challenged to improve much if the core Americas region is lackluster,” Crockett added. He kept his $198 price target on the stock intact.
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