There remains to be loads of room for upside in technology stocks, Morgan Stanley said earlier this week. The company named numerous firms that it says are well-positioned following their recent quarterly earnings reports. CNBC Pro dug into Morgan Stanley’s research to search out the corporate’s hottest chubby stocks based on its latest results and updated forecasts. These include: Spotify, Apple, Alphabet and Microsoft. According to the corporate, the Internet search giant is “running at full speed.” Analyst Brian Nowak called the April 25 earnings report “particularly strong.” “GOOGL’s Q1 revenue and EBIT exceedance demonstrate the sustainability of core growth and management’s early success in permanently reshaping the cost base,” he wrote. Additionally, YouTube growth is accelerating and advances in artificial intelligence have gotten more apparent, with further upside to come back. “We believe that GOOGL’s AI positioning is improving and that investors are starting to recognize this,” he said. The company also raised the stock’s price goal to $195 per share from $165, which is about 17% above the stock’s price level on Friday. “There are still a number of clear catalysts in the coming months that can increase confidence in GOOGL’s AI position and the sustainability of long-term growth,” Nowak said. Shares are up greater than 19% this yr. Microsoft is “winning in AI,” analyst Keith Weiss said after the tech giant’s quarterly results. The company recently reported solid revenue and profit growth in addition to solid third-quarter guidance, leading Weiss to put in writing that the very best is yet to come back for Microsoft. Shares are up 33% within the last 12 months and still have loads of room to run. In particular, the “durability of EPS growth.” [is] “still not reflected in the shares,” he added. But it’s the corporate’s leadership in AI that has the corporate most excited in regards to the stock. Morgan Stanley’s latest survey reviews show that AI has not yet had an impact on firms’ IT budgets. “Microsoft is expected to be well positioned to capture this market share as AI innovation cycles are just beginning, and we see a lot of potential for growth,” he said succinctly. The music streaming giant’s shares are too attractive to disregard. The company’s underwhelming earnings report from late April reported a robust top and bottom line, in response to Spotify, showing that the bull market remains to be alive, analyst Benjamin Swinburne wrote: “The biggest positive surprise this quarter came from gross margins. “Spotify leveraged music, podcasting and other cost of sales,” he said. Swinburne said Spotify has “a superior product and untapped pricing power” and “these aspects will translate into underestimated earnings power.” In addition, the company has an advertising opportunity that does not receive enough attention among investors. The company’s shares are up 57% and Swinburne raised his price target on the stock to $370 per share from $350. “Back in black,” he shouted. Spotify “Back in the Black.” The results and outlook reinforce our optimistic view – a) that music is undervalued and at the beginning of a repricing cycle, b) that Spotify has long growth opportunities, a superior product and untapped pricing power, & c ) that these factors will lead to underestimated earnings power… The biggest positive surprise this quarter came from gross margins, where Spotify leveraged music, podcasting and other cost of sales. Microsoft “Winning in AI”. … Since the AI innovation cycle is just beginning, we see a lot of potential for growth. ….The bottom line is that even in our conservative base case, Microsoft is able to maintain a compound annual growth rate per share (EPS) of 16% through FY29, a durability of EPS growth that still hasn’t materialized into the Reflects shares trading today at 28x fiscal 2020 GAAP EPS. Apple’s AAPL led to an above-average June Q, easing iPhone concerns from China and hitting an all-time Rev and GM in services [gross margin] Record, approved the largest incremental buyback in history and hinted that Generation AI announcements will follow in the next few weeks. It’s hard not to be even more optimistic after this. … We see repurchases increasing to $23-25 billion per quarter after Apple announced its largest incremental repurchase authorization in history.” Alphabet “GOOGL’s Q1 revenue and EBIT beat show the persistence of core growth and management’s early success in permanently reshaping the cost base. … We believe that GOOGL’s AI positioning is improving and that investors are starting to recognize this. … There continue to be clear catalysts in the coming months that can increase confidence in GOOGL’s AI position and the sustainability of long-term growth.”
