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Wall Street expects gains for Alphabet and the rest of the $1 trillion gang to slow from here


Tim Cook at the Apple launch event in Cupertino Calif. on Sept. 10th, 2019.

Source: Apple

There are now three U.S. stocks with a market capitalization above $1 trillion – but, judging by the average view on Wall Street, none of these stocks will climb much farther this year.

Apple, Microsoft and Alphabet are all now in the $1 trillion club, thanks to the latter joining on Thursday. But the average Wall Street estimate shows an expectation for meager to no returns in the next 12 months, according to FactSet. The consensus view is that Apple will drop 8.2%, Microsoft will rise 3% and Alphabet will gain 4.5% in the next one year.

Analysts are normally very bullish on most of the stocks they cover. But Wall Street’s more tepid view comes after each of the stocks have had excellent – and in the case of Apple, spectacular – run-ups in the past year. In 12 months, Apple is up 102%, Microsoft is up 57% and Alphabet is up 33%. The strong gains of the tech giants also means they dominate the stock market: Combined with Amazon and Facebook, the five companies now make up 18% of the total market value of the S&P 500, according to Morgan Stanley. That’s unprecedented, as its the highest percentage in history, the firm said.

Apple shares have doubled in value in the past year, putting the stock “at its highest relative multiple in a decade,” Bernstein analyst Toni Sacconaghi said in a Jan. 10 note.

“We see risk-reward on Apple as balanced,” Sacconaghi said.

A few analysts are still bullish on Apple’s prospects this year, such as Morgan Stanley’s Katy Huberty. She thinks the stock is set to climb further, saying “Apple has proven less earnings dependency on iPhone with the success of Services and Wearables which now make up 27% of revenue and 37% of profits.”

Microsoft and Alphabet both have a few optimistic analysts still recommending investors buy shares. Two recent notes – one from Credit Suisse on Microsoft and the other from UBS on Alphabet – both recommended the stocks in part because of the potential of their cloud businesses. Credit Suisse said “Microsoft can reasonably achieve Commercial Cloud revenues of $100 Billion” by fiscal year 2024,” while UBS said cloud computing is “an area where GOOG mgmt will continue heavy levels of investment to maintain/build upon recent end market success.”

– CNBC’s Michael Bloom and Yun Li contributed to this report.



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