Review
Meta Platforms Inc (META US, NEUTRAL, TP US$182)
Comment: Meta’s 4Q22 earnings were largely in line with our expectations; revenue beat slightly on higher holiday ad sales and continued user growth, although still declining by 4% YoY. The adjusted earnings beat by 58% due to lower expenses. Meta also remained fully committed to streamlining costs moving forward with plans on reducing CAPEX, and further cutting headcount to improve its fixed costs base. Near-term digital advertising demand is still expected to remain weak, with 1Q23e revenue guidance to be an expected 2% YoY contraction.
Apple Inc (AAPL US, BUY, TP US$186)
Comment: Apple’s 1Q23 earnings were a modest miss from our expectations. Revenue was down 5.5% YoY, dragged by 8% decline in iPhone sales and 29% drop for Mac but was partially offset by 30% growth in iPad and services growth of 6% YoY (13% in constant currency). Gross margin also expanded QoQ despite a stronger FX headwind. Apple expects 2Q23e revenue to experience a similar decline of 5% YoY with Mac and iPad expected to be down by double digits due to tough comparison and macro headwinds.
Amazon Inc (AMZN US, ACCUMULATE, TP US$117)
Comment: Amazon’s 4Q22 earnings were largely in line with our expectations. Revenue beat company guidance due to a sales boost from Prime Early Access Sale in October and Thanksgiving-Cyber Monday weekend sales outperformance. Its advertising revenue also grew 19% YoY despite competitors seeing decline in their digital ads business. AWS was still the fastest growing segment at 20%, but this is expected to decelerate in 1Q23 as customers continue to opt for lower-cost products. The layoffs came as no surprise as improving efficiency has been Amazon’s focus throughout 2022 and it made progress as evidenced by the average revenue per employee increasing by 13% YoY.
Netflix Inc (NFLX US, ACCUMULATE, TP US$388)
Comment: Netflix’s 4Q22 earnings were in line with our estimates. Revenue grew 2% (10% in Constant Currency), boosted by an outperformance in subscriber additions (7.7mn reported vs 4.5mn guidance). Additionally, its new ad-supported plan continues to show early signs of promise, with engagement and growth trending above expectations. Netflix also looks to have turned the corner on FCF. It generated US$1.6bn in FCF for FY22, compared to -US$159mn in FY21, led by a moderation in content spend, and improved operating efficiency.
Alphabet Inc (GOOGL US, BUY, TP US$131)
Comment: Alphabet’s 4Q22 earnings were in line with our expectations, with revenue growth of 1% YoY (7% in Constant Currency). Revenue growth was led by strong cloud momentum, offset slightly by an expected 2% decline in advertising revenue. Alphabet also expects to slow expense growth moving forward, with a 6% cut in workforce, and stagnant CAPEX levels in FY23e compared wth FY22. Operating margins are expected to remain fairly flat in FY23e due to consolidation and severence-related charges, but to expand more meaningfully in FY24e to about 35%.
Microsoft Corp. (MSFT US, BUY, TP US$298)
Comments: 1H23 results was within expectations, with revenue/PATMI at 48%/46% of our FY23e forecasts. Strength in its cloud-computing services continued to drive growth for Microsoft, with Azure revenue growing 38% YoY in constant currency in 2Q23. Azure guidance for 3Q23e was soft with expectation of 30% YoY growth in constant currency as large customers paused their spending amid the economic slowdown. Overall, cloud is the growth driver for Microsoft as companies prioritize digital transformation, but the short term is weighed down by FX headwinds and the middle term by PC market weakness.
Apple Inc. (Daily Chart) – Technical BUY at US$149 upon retest of the uptrend support line
Broke out of a downtrend resistance line recently and found support at US$142 upon the retest. The price could continue its bullish momentum as it also broke out of a horizontal resistance level at US$149 and found support upon the retest, while being supported by an uptrend support line. The current resistance will be the US$157 level which was a recent swing high. Further resistance upwards will be at the US$163 level, which was a previous swing high in September 2022.
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