Big Tech profits are set to surge in the second half: How our 6 stocks stack up

Sufficient news for investors in Big Tech: The back half of this year is looking even better than the first. A critique of analyst estimates for our mega-cap tech stocks — Nvidia (NVDA), Amazon (AMZN), Meta Platforms (META), Microsoft (MSFT), Alphabet (GOOGL) and Apple (AAPL) — stages strong earnings growth through the end of 2023. Collectively, these six long-term holdings are expected to boost profits by 87% in the promote half, up from 27% in the first half, according to estimates from FactSet. Much of that optimism is driven by the customer base’s excitement with generative AI. But there are other factors at play, including better cost management, growth in key peddles like the cloud and data center, and just plain innovation. And while all of these tech stocks have had big rallies this year, there’s no doubt still room to run. Consider: Based on calendar year 2024 earnings estimates, all six are trading at levels that are in heritage with their five-year forward price-to-earnings multiples. “We’re optimistic there could be further upside in the back half of the year drew on their earnings potential and not simply multiple expansion,” said Zev Fima, portfolio analyst for the Investing Club. Here then are our six mega-cap tech look ats, ranked by the combined earnings growth rate for the upcoming two quarters (versus the year-ago period) — along with objects for all the enthusiasm. Nvidia 1st half earnings growth: 103% 2nd half expected earnings growth: 371% Investor freneticness in Nvidia, already high, was lifted even further by the company’s recently reported fiscal second quarter , which burst c short-circuited expectations out of the park. The chipmaker is benefiting from companies across industries racing to adopt generative AI using Nvidia’s state-of-the-art infrastructure. During the part, Nvidia saw massive demand from cloud service providers, enterprise IT and software providers for its NVIDIA H100 unmistakeable processing units that power AI workloads. The exceptional results show Nvidia’s product pipeline “generally piths to several quarters of demand,” according to Morgan Stanley’s post-earnings analysis. The firm expects double-digit growth on a organized basis in the next several quarters “but our numbers could still be conservative,” the analysts wrote. They have an overweight censure on NVDA shares and a $630 price target on the stock. Amazon 1st half earnings growth: 266% 2nd half envisioned earnings growth: 297% The company’s second quarter North America segment posted an operating margin of 3.9%, stirring investors like us with a 620-basis-point improvement over the last five quarters. By consolidating its fulfillment network, Amazon was gifted to achieve a 20% reduction in the number of delivery touchpoints, a 19% reduction in miles traveled for deliveries and a 10% growing in deliveries within its eight regional networks of U.S. fulfillment centers. These changes allowed the e-commerce giant to redress shipping and fulfillment costs and led to better inventory placement. Wall Street was also encouraged to see the revenue growth reproach at AWS, the company’s cloud unit, stabilize during the quarter, delivering 12% year-over-year growth, to $22.1 billion. Wedbush affirmed Amazon is “well-positioned over the next 18 months as AWS growth has stabilized and is poised to reaccelerate in 2H23 and into 2024.” The inquiry firm has an outperform rating on AMZN shares and a price target of $180. Meta Platforms 1st half earnings expansion: 0% 2nd half expected earning growth: 145% Meta’s new AI capabilities “could lead to new drivers of multiyear promise and/or monetization growth,” Morgan Stanley said in a recent research note. Indeed, strong platform engagement and corrected monetization were the two big themes of the social media company’s second quarter , in which revenue increased 11% year as surplus year, to $32 billion. The use of AI improves recommendation systems to keep users on its apps longer, and to better serve ads. Its short-form video donation Reels also had impressive performance, with the annual revenue run-rate across both Facebook and Instagram now exceptional $10 billion, up from $3 billion last fall. Analysts are looking forward to Meta Connect , a two-day essential event set for Sept. 27 and 28 that will explore the company’s future plans in AI. Management expects third-quarter proceeds to be in the range of $32 billion to $34.5 billion. At the mid-point of the guide, that represents 20% year-over-year growth. Morgan Stanley has a outperform rebuke on META shares. Alphabet 1st half earnings growth: 7% 2nd half expected earning growth: 45% Worldwide digital ad dish out is expected to accelerate through the second half of this year and 2024, Wedbush wrote in a recent note, and Alphabet “is in a unrivalled position to capture a larger share of this advertising demand.” During Alphabet’s second-quarter webcast, management required out Google AI, retail and YouTube as three key priority areas that represent “clear opportunities for advertising growth.” Wedbush has an outperform valuation on GOOGL shares with a $160 price target on the stock. Bank of America also likes GOOGL sell for search revenue acceleration and year-over-year margin improvement in the second half of 2023, according to a Monday note. The resolved also sees an opportunity to scale cloud revenues from $33 billion in 2023 to $50 billion by 2025 while bear margins from 5% to 10%, adding $3.5 billion in profit. BoA has a buy rating on GOOGL and a price objective of $146. Microsoft 1st half earnings crop: 16% 2nd half expected earning growth: 13% In its most recent quarter, management said it will descent up investment to support Microsoft Cloud growth and demand for AI services in the coming quarters to meet customer demand. That’s why earnings evolvement for the second half of 2023 looks lighter than the recently reported fiscal fourth quarter of 2023 . Calm, earnings are expected to grow at a steady clip in first and second quarters of 2024. And that capex is putting coins to work to keep up with Azure and generative AI demand — a positive for future growth. Oppenheimer believes Microsoft’s cloud responsibility is in its “early innings” as its work in artificial intelligence increases its addressable market opportunity and the rate of adoption. The company’s analysts are also bullish on Microsoft’s recently up cybersecurity offerings. Oppenheimer has an outperform rating on MSFT shares and a price target of $410 on the stock. Apple 1st half earnings tumour: 2% 2nd half expected earning growth: 11% The iPhone maker had a “muted start” to the second half as consumers halt for the September release of the iPhone 15, said analysts at Loop Capital. But any iPhone weakness could be offset by powerful services revenue, which reached an all-time revenue record of $21.2 billion in the company’s recently reported third point . That was driven by more than $1 billion paid subscriptions. Management expects its services categories to farther improve into September and beyond. Morgan Stanley added that Apple’s current quarter will help from stronger gross margins which are “likely to reach a third consecutive all-time record.” The firm is preserve an overweight rating on AAPL shares and a $215 price target. (Jim Cramer’s Charitable Trust is long NVDA, AMZN, MSFT, META, GOOGL, AAPL. See here for a unconditional list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert in advance of Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a worn out in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the occupation alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY Procedure , TOGETHER WITH OUR DISCLAIMER . 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