Review
Meta Platforms Inc (META US, NEUTRAL, TP US$200)
Comment: Meta’s new subscription service should bring about incremental revenue for the company given its wide base of content creators. This additional stream of revenue should also be welcomed by investors given the company’s revenue contraction over the last 3 quarters as digital advertising demand continues to wane.
Apple Inc (AAPL US, BUY, TP US$186)
Comment: Although there was no official statement by Apple regarding the price cuts, we believe the discounts were a part of Apple’s efforts to boost consumer demand following the 7% YoY China revenue decline in 1Q23 and to clear excess inventory. This means that the demand in China was generally weaker than expected and the sales decline was not entirely due to supply disruptions. However, we still think Apple enjoys strong customer loyalty and that it could recapture some of the potentially lost sales in the subsequent quarters.
Amazon Inc (AMZN US, ACCUMULATE, TP US$117)
Comment: We believe the success and the benefits of the merger with 1Life Healthcare is yet to be seen as Amazon will face competition from major players like CVS, which had also made its own acquisition for expansion. Amazon was also greeted with difficulties in its previous healthcare ventures which led to the closure of its Amazon Care and Haven in 2021, a joint venture between the company, Berkshire Hathaway, and JPMorgan. On the other hand, we like Amazon’s move to source products directly from manufacturers in Europe. Europe is Amazon’s second largest market and therefore, we think such an initiative should meaningfully improve the company’s margins.
Netflix Inc (NFLX US, ACCUMULATE, TP US$388)
Comment: Netflix has finally implemented its crackdown on password sharing after talking about it for 2 quarters. However, we do expect the indirect revenue gained (from password sharers subscribing to their own plans) to be fairly limited in the early stages given the discretionary nature of the entertainment business, although the potential revenue earned from this crackdown could reach US$14bn annually.
Alphabet Inc (GOOGL US, BUY, TP US$131)
Comment: We are positive on Alphabet’s partnership with Mercedes on 2 fronts: 1) it demonstrates the company’s ability to gain revenue from corporates outside of digital advertising, reducing the reliance on a single revenue segment; 2) it shows that the company’s investments in Cloud and AI complement each other in producing better products for end-users.
Microsoft Corp. (MSFT US, BUY, TP US$298)
Comments: Cloud is the major growth driver for Microsoft given the momentum of digital transformation and the subsequent push to cloud adoption by companies. In 2Q23, Azure revenue jumped by 38% YoY in constant currency, but this is expected to decelerate to 30% YoY growth rate in 3Q23e as large customers pause their spending amid the economic slowdown. Near-term personal computer demand is still expected to remain weak, with 3Q23e Windows OEM revenue expected to decline in the mid-to-high 30% range.
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