In a dynamic day for the tech market, Amazon.com exhibited remarkable resilience by closing up more than 8 percent on Friday. The surge in Amazon’s stock value was attributed to positive signs indicating robust performance in its key growth engines – e-commerce and cloud-computing. This optimistic performance stood in stark contrast to Apple, which witnessed a 4.8 percent slide in its shares due to disappointing iPhone sales, impacting its market value.
As reported by Reuters, this trend concluded an earnings season that was largely favorable for major U.S. tech giants, including Google-owner Alphabet and Meta. The resurgence in the digital ad market and growing demand for cloud services helped uplift these firms, following a prolonged slump.
Amazon’s shares attained a near one-year high, bolstering its market value by more than US$109 billion. Meanwhile, Apple, known as the world’s most valuable company, experienced a decline to a more than one-month low, shedding approximately US$144 billion in market capitalization by the close of trading on Friday.
The second quarter proved to be transformative for Amazon, showcasing its capacity for simultaneous growth in both its e-commerce and cloud businesses. The outcome marked a significant shift from a series of challenging quarters, as pointed out by SVB MoffettNathanson analyst Michael Morton, who referred to this quarter as an “all clear moment.”
Amazon’s outstanding quarterly profit and sales figures prompted a positive response from Wall Street analysts. This consensus indicated that Amazon’s pivotal businesses have the potential to thrive in tandem, following a period of unpredictability.
An impressive consequence of this performance was the surge in Amazon’s stock, causing a rise in analysts’ earnings estimates. Refinitiv data reveals that nearly half of the analysts covering Amazon raised their price targets, collectively pushing the median view to US$170. This projection translates to an approximate 32 percent upside potential for Amazon shares, which have already gained nearly 50 percent in value over the course of the year.
This significant increase in Amazon’s stock value aligned with the boosted earnings estimates. At US$139.57, the stock’s valuation amounted to 47 times the projected earnings per share for 2024, a slight reduction from 50 on the previous day, according to Refinitiv’s updated estimates.
On the other hand, Apple’s shares closed at US$181.99 on Friday, indicating a valuation of about 27.6 times the expected earnings per share for fiscal year 2024. The technology giant’s recent announcement cautioned investors about an anticipated fourth consecutive quarter of declining sales, primarily driven by sluggish demand for its flagship product, the iPhone, particularly in developed markets.
Despite this predicament, Apple’s services business emerged as a silver lining, aiding the company in surpassing profit expectations for the June quarter. The resilience exhibited by both Amazon and Apple underscores the dynamic nature of the tech industry, where a multitude of factors influence market dynamics and investor sentiment.
In summary, Amazon’s remarkable stock surge, accompanied by Apple’s share decline due to subdued iPhone sales, offers a snapshot of the intricate dynamics within the tech sector. While Amazon’s diverse growth engines fueled its positive trajectory, Apple navigated challenges by leveraging its services business to mitigate the impact of slowing iPhone demand.
