Wall Street heavyweight JPMorgan is making a bold call on internet stocks for 2024, dubbing Amazon and Alphabet its “top picks” and predicting double-digit upside for both tech giants. This bullish outlook hinges on a belief that mega-cap tech’s reign will continue next year, fueled by reaccelerating revenue growth and strategic margin management.
Why Amazon is Soaring:
- E-commerce Engine Revving Up: JPMorgan expects Amazon’s total revenue to surge 13% in 2024, propelled by a 17% jump in Amazon Web Services (AWS) and an 11% increase in retail growth.
- Cloud Computing Champion: AWS, already a cloud market leader, will benefit from strong secular trends, new workload deployments, and growing contributions from its cutting-edge Gen AI advancements.
- Retail Rebound: With increased same-day delivery, expanded third-party fulfillment, and pricing power, Amazon’s core retail segment is poised for an 11% growth spurt.
- Profitability on the Rise: Operating income margin is projected to expand by 200 basis points, thanks to margin improvements in North America, International business, and a slight inflection in AWS margins.
Alphabet’s AI Advantage:
- Ad Revenue Ascending: Gross revenue is expected to climb 11% in 2024, driven by Google Cloud and YouTube ads. AI-powered ad tools, secular shifts in online advertising, YouTube Shorts monetization, and favorable comparisons are key drivers.
- Margin Magic: JPMorgan forecasts a 175-basis-point expansion in profit margin as Alphabet optimizes its cost structure.
- Gen AI Leapfrog: The innovative Gemini Ultra platform positions Alphabet to bridge the gap with Generative AI leaders, further solidifying its AI-forward image.
- Undervalued and Unloved: Weaker sentiment and lower institutional ownership, coupled with an “undemanding” valuation, make Alphabet a lucrative opportunity for investors in 2024.
Looking Ahead:
JPMorgan acknowledges potential hurdles like antitrust lawsuits against Google and a potential slowdown in the broader tech sector. However, the bank’s unwavering belief in the power of Amazon’s e-commerce engine and Alphabet’s AI prowess leads them to predict outsized gains for both companies in 2024.
This bold call from a major financial institution is sure to send ripples through the tech landscape. Investors looking for high-growth, high-margin plays in the internet space will keep a close eye on Amazon and Alphabet as they aim to scale new heights in the coming year.
Shayne Heffernan
