Merrill Lynch Says Blowout Earnings Tech Stocks Are Going Higher: 4 to Buy Now

Technology

Published: November 1, 2017 8:25 am

Last week brought some of the most incredible earnings reports the market has seen in years. Mega-cap technology companies absolutely crushing the earnings ball out of the park, and in the process scorching those who have chosen to bet against them by short selling the shares. One thing is for sure, with huge earnings and momentum buyers piling into the stocks, there could be more upside to come.

Last Thursday four leading technology companies blew out their earnings and collectively added an incredible $150 billion to their market capitalizations. That is more than the total market cap of the venerable IBM. The four companies are all rated Buy at Merrill Lynch and could continue their race higher.

Amazon

This is the absolute leader in online retail and a dominant player in cloud storage business, and it remains the top pick on Wall Street. 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 company absolutely blew out earnings, and the Merrill Lynch report said this:

Strong quarter with top and bottom line beat. International, retail, subscriptions (Prime) and AWS above expectations. Raising revenue estimates by 2% and price objective based on 1.2x gross merchandise value, and 7.0x AWS revenues in sum of the parts. Amazons share should continue to expand supported by new categories; Prime customer lock-in, and growing traction in international.

The Merrill Lynch price target for the shares is $1,220, and the Wall Street consensus target is $1,219.12. The stock closed most recently at $1,105.28 per share.

Alphabet

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 search leader also pounded Wall Street estimates, and the analysts said this in their research coverage:

Alphabet delivered upside to revenue, margins, and GAAP earnings per share, Website ex-currency growth acceleration a key positive. Higher distribution traffic acquisition costs rate increase could temper enthusiasm, but profit growth trajectory intact. Raising estimates and price objective on higher 2018 estimates and multiple. Further upside on 2019 estimates.

Merrill Lynch has raised its price target to $1,200 from $1,100. The posted consensus price objective is $1,170.98, and the shares ended Tuesday’s trading at $1,033.04 apiece.