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Amazon.com and Texas Instruments have been highlighted as Zacks Bull and Bear of the Day
Read MoreHide Full Article
For Immediate Release
Chicago, IL – November 2, 2023 – Zacks Equity Research shares Amazon.com, Inc. (AMZN - Free Report) as the Bull of the Day and Texas Instruments Inc. (TXN - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Microsoft Corp.'s (MSFT - Free Report) , Electronic Arts' (EA - Free Report) and Nintendo's (NTDOY - Free Report) .
Amazon.com, Inc.topped third-quarter earnings and revenue estimates last week and raised its guidance. Amazon's e-commerce and advertising units are mounting comebacks after their post-Covid slowdowns, while its new AI-focused efforts are boosting its vital cloud business.
AMZN stock surged after its October 26 report to help it retake some key moving averages. Amazon's recent jump is part of an impressive rally off its lows.
Yet, investors can still buy Amazon far below its all-time highs and its average Zacks price target. Plus, its valuation levels are enticing given its commitment to the bottom line in our new higher interest rate environment, alongside Meta and many others.
Quick Q3 Recap
Amazon's quarterly revenue climbed by 13% to $143.08 billion, with AWS cloud sales up 12% YoY. The company's high-margin third-party seller services and advertising units popped by 20% and 26%, respectively, with its lower-margin core online stores segment up 7%.
Amazon's adjusted earnings soared 325% from the year-ago period to $0.85 per share, topping our estimate by 47%. Amazon has crushed our bottom-line estimates by an average of 55% in the last four quarters.
AMZN's operating income hit a record of $11.2 billion, up from $2.5 billion in Q3 FY22. AWS operating income hit $7.0 billion vs. $5.4 billion. Amazon's free cash flow improved to an inflow of $21.4 billion for the trailing twelve months vs. an outflow of $19.7 billion in the comparable 12-month period.
Growth Outlook
Wall Street is a forward-looking world and it was impressed by Amazon's guidance. AMZN's consensus Q4 EPS estimate is up by 13% since its report, with its outlook for fiscal 2023 up 18% and 13% higher for FY24. On top of that, its most accurate/most recent estimates have come in above the current Zacks consensus. Amazon's overall improved earnings outlook helps it land a Zacks Rank #1 (Strong Buy) right now.
Amazon is firmly focused on cutting costs and streamlining its business after years of attempting to post breakneck growth and expansion into new areas no matter the cost.
Yet, the strength and importance of its cloud computing and e-commerce businesses will help it churn out stable double-digit growth in the near-term and possibly beyond. Amazon reportedly held 32% of the cloud computing market last quarter vs. Microsoft's (MSFT - Free Report) 22% and Google's 11%. AMZN captures roughly 38% of the total U.S. e-commerce market.
Current Zacks estimates call for Amazon to post 11% revenue growth in 2023 to hit $570.42 billion and then climb 12% higher next year to pull in $637.42 billion—adding a projected $124 billion to the top line between FY22 and FY24.
CEO Andy Jassy highlighted the benefits Amazon is experiencing since it shifted from a single national fulfillment network in the U.S. to eight distinct regions. On the AWS cloud computing front, the firm is rolling out more AI-focused efforts to help attract customers to spend more as everyone races to not get left behind in the new frontier of tech. Amazon is also boosting AWS margins by rolling out more in-house chips.
Performance, Technical Levels & Valuation
Amazon stock has climbed 675% in the last decade to blow away the Zacks Tech sector's 215%, Meta's (META) 545%, and the S&P 500's 145%. More recently, AMZN is roughly neck and neck with Tech over the trailing five years, with it currently down around 27% from its record highs.
AMZN has surged 61% YTD to top Microsoft's 43% and Tech's 30%, yet it still trades 28% below its average Zacks price target of $170.60 per share. Investors must also remember that its price per share is much lower (and more attainable to the average investor) after it completed its 20-for-1 stock split last summer.
Amazon found support near its 200-day moving average after its upbeat report and its recent rebound has it out of oversold RSI territory and above its 50-day once again. The stock is also now retaking both its 200-week moving average and its 50-month, while still trading at neutral RSI levels on a 15-year timeframe.
Turning to valuation, Amazon trades 65% below its highs at 44.6X forward 12-month earnings, which is still rather pricey. Yet, its peg ratio, which factors in its longer-term earnings outlook, marks an 18% discount vs. the Zacks tech sector.
Bottom Line
All in, investors with long-term outlooks might want to consider buying Amazon at these levels and making it part of their portfolios for the foreseeable future as AMZN undergoes its transformation into a mature, stable growth tech stock.
Texas Instruments Inc. shares have tumbled since late July, driven lower by its tepid earnings outlook.
TXN stock took another dive after it disappointed Wall Street once again with its guidance when it reported on October 24. Texas Instruments is trading below multiple key moving averages as well.
TI's Basics
Texas Instruments or TI designs and manufactures analog and embedded semiconductors. TI's chips are utilized within the automotive and industrial sectors, as well as consumer electronics, communications equipment, and beyond.
The analog chip maker is staring down near-term weakness within the historically cyclical chip sector due to wider macroeconomic trends.
Texas Instruments fell short of both our Q3 earnings and revenue estimates. TI's sales came in flat sequentially and dropped 14% from the year-ago period. The firm said that its automotive growth continued in Q3 but noted that its industrial weakness broadened.
Zacks estimates call for its revenue to fall 12% in the fourth quarter and for its adjusted earnings to drop by 30% YoY. TI's fiscal 2023 earnings are projected to slide by 25% YoY and then slip another 5% next year.
Texas Instruments stock is down over 20% since its Q2 report in July and nearly 30% from its 2021 peaks. TI shares are now trading firmly below both their 50-day and 200-day moving averages.
Worst still, the stock is far beneath its 200-week level for the first time in the last decade and trading under its 50-month moving average.
Bottom Line
Some investors might be thinking about taking advantage of TXN's huge downturn and view its technical levels as an opportunity to buy Texas Instruments near what could be its lows. But the company's downward earnings revisions help it land a Zacks Rank #5 (Strong Sell) at the moment and its valuation level is not very appealing yet either.
It might be best to stay away from Texas Instruments shares for now and look to other semiconductor names or tech stocks that are providing upbeat guidance.
Additional content:
Can Videogame Makers Stage a Turnaround from 2022 Lows?
The U.S. videogame market had a not-so-memorable 2022 as sales declined drastically. A dearth of new title releases coupled with inflationary pressures saw videogame makers suffering almost throughout last year.
However, sales have been rebounding this year, and September proved to be one of the best months as spending is once again gathering pace, with inflation showing signs of decline. Given this situation, investing in videogame stocks would be prudent.
Videogame Sales Jump
Videogames sales jumped in September, driven by multiple new title releases. Gamers spent a solid $4.5 billion on video games, hardware and accessories in September, reflecting an increase of 10% from the year-ago figure of $4.1 billion, according to research group Circana.
Year-to-date videogame sales have totaled $39.4 billion compared to $38.4 billion, or up 2% from the comparable period last year.
September sales were primarily driven by gaming content, which rose 13% to $3.8 billion in September on a year-over-year basis. Sales of accessories grew 11% to $197 million year over year in September.
Six of the top 10 games for September were new releases. Microsoft Corp.'s new release, Starfield, was the top-selling title in September. MSFT also posted robust first-quarter fiscal 2024 revenues, driven by Xbox content and services revenues, which jumped 13%. Overall gaming revenues for Microsoft rose 9% for the quarter ending Sep 30 on a year-over-year basis.
Electronic Arts' EA Sports 24, also a new release, was the third-ranking title in September. EA's Madden NFL 24 came in at number 4.
Separately, Sensor Tower reported that mobile game spending trends increased more than 4% in September on a year-over-year basis. Microsoft's Candy Crush Saga and Nintendo's Pokemon Go were among the top 10 games in September.
Videogame sales hit record highs during the peak of the pandemic in 2020 as people opted for indoor entertainment. Things started changing drastically once the economy reopened as options for outdoor entertainment were back.
This saw sales slowing in 2021. Things took a turn for the worse in 2022 as inflationary pressures compelled people to cut down on spending on discretionary items. The Fed adopted an aggressive monetary tightening policy that saw the central banking hiking interest rates by 525 basis points since March 2022.
Higher borrowing costs and a dearth of new title releases saw sales plummet last year. However, things are looking up now, with inflation having sharply declined over the past year from its peak of 9.1% in June 2022.
Also, personal income has been steadily increasing, allowing people to spend more freely. Moreover, with the holiday season around, videogame sales are expected to get a further boost in the near term.
Why Haven't You Looked at Zacks' Top Stocks?
Since 2000, our top stock-picking strategies have blown away the S&P's +6.2 average gain per year. Amazingly, they soared with average gains of +46.4%, +49.5% and +55.2% per year. Today you can access their live picks without cost or obligation.
Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
pPast performance is no guarantee of future results. Inherent in any investment is the potential for loss.This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performancefor information about the performance numbers displayed in this press release.
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Amazon.com and Texas Instruments have been highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – November 2, 2023 – Zacks Equity Research shares Amazon.com, Inc. (AMZN - Free Report) as the Bull of the Day and Texas Instruments Inc. (TXN - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Microsoft Corp.'s (MSFT - Free Report) , Electronic Arts' (EA - Free Report) and Nintendo's (NTDOY - Free Report) .
Here is a synopsis of all five stocks:
Bull of the Day:
Amazon.com, Inc. topped third-quarter earnings and revenue estimates last week and raised its guidance. Amazon's e-commerce and advertising units are mounting comebacks after their post-Covid slowdowns, while its new AI-focused efforts are boosting its vital cloud business.
AMZN stock surged after its October 26 report to help it retake some key moving averages. Amazon's recent jump is part of an impressive rally off its lows.
Yet, investors can still buy Amazon far below its all-time highs and its average Zacks price target. Plus, its valuation levels are enticing given its commitment to the bottom line in our new higher interest rate environment, alongside Meta and many others.
Quick Q3 Recap
Amazon's quarterly revenue climbed by 13% to $143.08 billion, with AWS cloud sales up 12% YoY. The company's high-margin third-party seller services and advertising units popped by 20% and 26%, respectively, with its lower-margin core online stores segment up 7%.
Amazon's adjusted earnings soared 325% from the year-ago period to $0.85 per share, topping our estimate by 47%. Amazon has crushed our bottom-line estimates by an average of 55% in the last four quarters.
AMZN's operating income hit a record of $11.2 billion, up from $2.5 billion in Q3 FY22. AWS operating income hit $7.0 billion vs. $5.4 billion. Amazon's free cash flow improved to an inflow of $21.4 billion for the trailing twelve months vs. an outflow of $19.7 billion in the comparable 12-month period.
Growth Outlook
Wall Street is a forward-looking world and it was impressed by Amazon's guidance. AMZN's consensus Q4 EPS estimate is up by 13% since its report, with its outlook for fiscal 2023 up 18% and 13% higher for FY24. On top of that, its most accurate/most recent estimates have come in above the current Zacks consensus. Amazon's overall improved earnings outlook helps it land a Zacks Rank #1 (Strong Buy) right now.
Amazon is firmly focused on cutting costs and streamlining its business after years of attempting to post breakneck growth and expansion into new areas no matter the cost.
Yet, the strength and importance of its cloud computing and e-commerce businesses will help it churn out stable double-digit growth in the near-term and possibly beyond. Amazon reportedly held 32% of the cloud computing market last quarter vs. Microsoft's (MSFT - Free Report) 22% and Google's 11%. AMZN captures roughly 38% of the total U.S. e-commerce market.
Current Zacks estimates call for Amazon to post 11% revenue growth in 2023 to hit $570.42 billion and then climb 12% higher next year to pull in $637.42 billion—adding a projected $124 billion to the top line between FY22 and FY24.
CEO Andy Jassy highlighted the benefits Amazon is experiencing since it shifted from a single national fulfillment network in the U.S. to eight distinct regions. On the AWS cloud computing front, the firm is rolling out more AI-focused efforts to help attract customers to spend more as everyone races to not get left behind in the new frontier of tech. Amazon is also boosting AWS margins by rolling out more in-house chips.
Performance, Technical Levels & Valuation
Amazon stock has climbed 675% in the last decade to blow away the Zacks Tech sector's 215%, Meta's (META) 545%, and the S&P 500's 145%. More recently, AMZN is roughly neck and neck with Tech over the trailing five years, with it currently down around 27% from its record highs.
AMZN has surged 61% YTD to top Microsoft's 43% and Tech's 30%, yet it still trades 28% below its average Zacks price target of $170.60 per share. Investors must also remember that its price per share is much lower (and more attainable to the average investor) after it completed its 20-for-1 stock split last summer.
Amazon found support near its 200-day moving average after its upbeat report and its recent rebound has it out of oversold RSI territory and above its 50-day once again. The stock is also now retaking both its 200-week moving average and its 50-month, while still trading at neutral RSI levels on a 15-year timeframe.
Turning to valuation, Amazon trades 65% below its highs at 44.6X forward 12-month earnings, which is still rather pricey. Yet, its peg ratio, which factors in its longer-term earnings outlook, marks an 18% discount vs. the Zacks tech sector.
Bottom Line
All in, investors with long-term outlooks might want to consider buying Amazon at these levels and making it part of their portfolios for the foreseeable future as AMZN undergoes its transformation into a mature, stable growth tech stock.
Bear of the Day:
Texas Instruments Inc. shares have tumbled since late July, driven lower by its tepid earnings outlook.
TXN stock took another dive after it disappointed Wall Street once again with its guidance when it reported on October 24. Texas Instruments is trading below multiple key moving averages as well.
TI's Basics
Texas Instruments or TI designs and manufactures analog and embedded semiconductors. TI's chips are utilized within the automotive and industrial sectors, as well as consumer electronics, communications equipment, and beyond.
The analog chip maker is staring down near-term weakness within the historically cyclical chip sector due to wider macroeconomic trends.
Texas Instruments fell short of both our Q3 earnings and revenue estimates. TI's sales came in flat sequentially and dropped 14% from the year-ago period. The firm said that its automotive growth continued in Q3 but noted that its industrial weakness broadened.
Zacks estimates call for its revenue to fall 12% in the fourth quarter and for its adjusted earnings to drop by 30% YoY. TI's fiscal 2023 earnings are projected to slide by 25% YoY and then slip another 5% next year.
Texas Instruments stock is down over 20% since its Q2 report in July and nearly 30% from its 2021 peaks. TI shares are now trading firmly below both their 50-day and 200-day moving averages.
Worst still, the stock is far beneath its 200-week level for the first time in the last decade and trading under its 50-month moving average.
Bottom Line
Some investors might be thinking about taking advantage of TXN's huge downturn and view its technical levels as an opportunity to buy Texas Instruments near what could be its lows. But the company's downward earnings revisions help it land a Zacks Rank #5 (Strong Sell) at the moment and its valuation level is not very appealing yet either.
It might be best to stay away from Texas Instruments shares for now and look to other semiconductor names or tech stocks that are providing upbeat guidance.
Additional content:
Can Videogame Makers Stage a Turnaround from 2022 Lows?
The U.S. videogame market had a not-so-memorable 2022 as sales declined drastically. A dearth of new title releases coupled with inflationary pressures saw videogame makers suffering almost throughout last year.
However, sales have been rebounding this year, and September proved to be one of the best months as spending is once again gathering pace, with inflation showing signs of decline. Given this situation, investing in videogame stocks would be prudent.
Videogame Sales Jump
Videogames sales jumped in September, driven by multiple new title releases. Gamers spent a solid $4.5 billion on video games, hardware and accessories in September, reflecting an increase of 10% from the year-ago figure of $4.1 billion, according to research group Circana.
Year-to-date videogame sales have totaled $39.4 billion compared to $38.4 billion, or up 2% from the comparable period last year.
September sales were primarily driven by gaming content, which rose 13% to $3.8 billion in September on a year-over-year basis. Sales of accessories grew 11% to $197 million year over year in September.
Six of the top 10 games for September were new releases. Microsoft Corp.'s new release, Starfield, was the top-selling title in September. MSFT also posted robust first-quarter fiscal 2024 revenues, driven by Xbox content and services revenues, which jumped 13%. Overall gaming revenues for Microsoft rose 9% for the quarter ending Sep 30 on a year-over-year basis.
Electronic Arts' EA Sports 24, also a new release, was the third-ranking title in September. EA's Madden NFL 24 came in at number 4.
Nintendo's Marlo Kart 8 was ranked number 15. However, hardware sales declined in September, which also saw sales of NTDOY's Switch taking a hit. Nintendo has a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Separately, Sensor Tower reported that mobile game spending trends increased more than 4% in September on a year-over-year basis. Microsoft's Candy Crush Saga and Nintendo's Pokemon Go were among the top 10 games in September.
Videogame sales hit record highs during the peak of the pandemic in 2020 as people opted for indoor entertainment. Things started changing drastically once the economy reopened as options for outdoor entertainment were back.
This saw sales slowing in 2021. Things took a turn for the worse in 2022 as inflationary pressures compelled people to cut down on spending on discretionary items. The Fed adopted an aggressive monetary tightening policy that saw the central banking hiking interest rates by 525 basis points since March 2022.
Higher borrowing costs and a dearth of new title releases saw sales plummet last year. However, things are looking up now, with inflation having sharply declined over the past year from its peak of 9.1% in June 2022.
Also, personal income has been steadily increasing, allowing people to spend more freely. Moreover, with the holiday season around, videogame sales are expected to get a further boost in the near term.
Why Haven't You Looked at Zacks' Top Stocks?
Since 2000, our top stock-picking strategies have blown away the S&P's +6.2 average gain per year. Amazingly, they soared with average gains of +46.4%, +49.5% and +55.2% per year. Today you can access their live picks without cost or obligation.
See Stocks Free >>
Media Contact
Zacks Investment Research
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Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
pPast performance is no guarantee of future results. Inherent in any investment is the potential for loss.This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performancefor information about the performance numbers displayed in this press release.