Meta Platforms Inc (META US, BUY, TP US$312)
Comment: Slowing down of hiring and other cost cutting measures is no surprise, as was reiterated in the company’s 1Q22 earnings call. A more sustainable and measured approach to expenses should also help the company’s margins in the future. Scrutiny from US lawmakers is intensifying with the latest bipartisan bill introduced in the Senate, as it attempts to reign in more control over big tech.
Apple Inc (AAPL US, BUY, TP US$214)
Comment: Some good news for Apple as it starts seeing a reacceleration in higher margin App Store revenues. Waning consumer demand for products and a tighter labour market continue to exert downward pressure on Apple’s margins.
Amazon Inc (AMZN US, BUY, TP US$3,130)
Comment: Rising inflation, tougher comps vs a pandemic-inflated 2021, and weak earnings across other online retailers sent Amazon’s stock down to its 52-week lows in May, as investor sentiment turned even more negative over worries of slowing consumer demand.
Netflix Inc (NFLX US, BUY, TP US$427)
Comment: Netflix’s plans to pull back spending by laying off employees was expected, as mentioned in their 1Q22 earnings call, as the company tries to maintain its profitability moving forward. The continued success of Netflix Original productions reiterates the company’s ability to generate quality content for its subscribers.
Alphabet Inc (GOOGL US, BUY, TP US$3,493)
Comment: The partnership with AMD continues to enhance Google Cloud’s credibility and effectiveness in providing quality cloud solutions for enterprises, and is one of the main reasons why we expect its Cloud segment to continue its high growth moving forward
Microsoft Corp (MSFT US, BUY, TP US$410)
Comment: Our investment thesis remains unchanged since these dynamics are beyond Microsoft’s control. We believe that strong corporate demand for Microsoft’s higher-end licenses will continue to grow amid rising cybersecurity concerns. Azure will continue to benefit from digital transformation and cloud migration trends, while reopening of offices is driving the Office Commercial user growth from small and medium sized businesses.
We remain OVERWEIGHT on the FAANGM. Our preferred picks are still GOOGL and MSFT. Increasing corporate demand for GOOGL’s high-margin Cloud services should continue to push revenue growth for the segment. For MSFT, revenue growth is still expected to be very strong, even as it reduces guidance marginally due to FX headwinds.