The fourth quarter is underway, and barring a major late year surprise, the market is poised for yet another solid year of gains. Many of the gains have been driven this year by the largest companies, and while valuations are stretched, if solid earnings and guidance are delivered during third-quarter reporting, you can bet that the top stocks can trade higher.
A new Stifel research report makes the case that the biggest companies in the technology world stand a very good chance in the coming years of getting substantially bigger. The report noted:
There are five U.S.-based technology companies, with market capitalizations ranging from $450 billion to $800 billion We are within 3-to-5 years of the possibility that the U.S. market could have five companies with $1 trillion market capitalizations. The shift to scale-based, tech-centric platforms is accelerating and some may argue that innovation and equality could suffer.
Stifel has six mega-cap tech favorites, all are rated Buy
This is the absolute leader in online retail and a dominate player in cloud storage business, and it remains the top pick at Stifel. Amazon.com Inc. (NASDAQ: AMZN) serves consumers through retail websites that primarily include merchandise and content purchased for resale from vendors and those offered by third-party sellers.
Amazon Web Services (AWS) is also the undisputed leader in the cloud now, and many top analysts see the company expanding and moving up the enterprise information value chain and targeting a larger total addressable market. The company serves developers and enterprises through AWS that provides compute, storage, database, analytics, applications and deployment services that enable virtually various businesses.
The Stifel price target for the shares is $1,100, and the Wall Street consensus target is $959.36. The shares closed Monday at $959.19.
Three years ago this was the hottest thing on the planet and getting ready to come public. Alibaba Group Holding Ltd. (NYSE: BABA) runs the largest retail marketplaces (Taobao, TMall) and leading B2B sites (Alibaba.com, 1688.com) in China and Lazada in Southeast Asia. It collects revenues mainly from commissions, marketing services, subscription fees, cloud computing and software, as well as other value-added services. It also owns media and partners with logistics and payment companies to offer delivery, warehousing, payment and financing services for its market participants.
The company recently reported huge quarterly numbers, and the driving force for some of the outperformance included social features, customized mobile app for users, cross-platform user tracking and ad targeting for merchants. In fact, growth returned to the levels the company was at when it went public.
Stifel has a $190 price target, which is lower than the consensus estimate of $196.01. Shares closed Monday at $173.61.
The search giant continues to expand and is even working on a driverless car now. Alphabet Inc. (NASDAQ: GOOGL) is a global technology company focused around key areas, such as search, advertising, operating systems and platforms, enterprise and hardware products. It generates revenue primarily by delivering online advertising and by selling apps and contents on Google Play, as well as hardware products. The company provides its products and services in more than 100 languages and in 190 countries, regions and territories.
Alphabet offers performance and brand advertising services. It operates through Google and Other Bets segments. The Google segment includes principal internet products, such as Search, Ads, Commerce, Maps, YouTube, Apps, Cloud, Android, Chrome and Google Play, as well as technical infrastructure and newer efforts, such as virtual reality.
The $1,075 Stifel price target compares with the consensus estimate of $1,093.90. Shares closed Monday at $967.47.