JPMorgan released its latest report on Wednesday, stating that the bank continues to be optimistic about the prospects of internet stocks in 2024, and large technology stocks should continue to lead the way they did throughout 2023.
As expected, Xiaomo's preferred stock is still a member of the "Technology Seven", but it is not this year's big favorites - Nvidia and Tesla, but Google's parent company Alphabet and Amazon. The bank believes that the profit growth of these two companies should accelerate again, while maintaining a balanced profit margin with some room for improvement.
"We expect that the profit growth of internet companies will generally accelerate back to a more normal level, and the annual growth rates of those major stocks (three of the" tech seven ") will return to lower double-digit levels.".
JPMorgan Chase stated that among large technology companies, Amazon has the greatest upward potential. This e-commerce giant has set a target stock price of $190, with a potential increase of 29% from the current level. The target price set by Alphabet for this behavior is $160, which may increase by 21% compared to the current level.
The following are the specific reasons why Xiaomo listed Alphabet and Amazon as "preferred stocks":
Amazon: Increase holdings, target price of $190
JPMorgan Chase predicts that Amazon's total revenue will increase by 13% from 2023 due to the growth of Amazon's network services and retail departments.
The report states, "In terms of cloud computing, we predict AWS's growth rate to be+17% (+13% in 2023), thanks to strong long-term growth, new capacity deployments, and the continuously growing contribution of next-generation artificial intelligence."
The bank stated that it expects retail revenue growth to increase by 11% in 2024, while the growth rate in 2023 is 9%, mainly due to the growth in same day delivery, third-party fulfillment, and pricing power.
Xiao Mo said, "In terms of profitability, we expect the operating profit margin to increase by about 200 basis points in 2024, mainly due to the recovery of North American profit margins to a mid single digit percentage level, with upward potential, improvement in international business profitability, and mild changes in AWS profit margins."
Amazon's stock price surged nearly 75% in 2023, far exceeding the 50% increase of the Nasdaq 100 index.
Alphabet: Increase holdings, target price of $160
Alphabet is JPMorgan's new first choice because the company's advertising growth has improved, profit margins have increased, and the newly launched artificial intelligence model Gemini has narrowed the gap with other similar products.
The bank stated that it expects Alphabet's total revenue to grow by 11% in 2024, mainly driven by its Google Cloud division and YouTube advertising. As it continues to adjust its cost structure, it is expected that the profit margin will expand by 175 basis points in 2024.
In addition, Alphabet's artificial intelligence program should also help it stand out as a cutting-edge AI company.
Xiao Mo said, "Although it's too early, we believe that the Gemini Ultra represents a significant innovation and should start narrowing the gap with generative artificial intelligence when it is launched in early 2024."
Meanwhile, JPMorgan Chase is not concerned that Alphabet may face antitrust lawsuits from the US government. The bank stated, "The impact may not be as severe as people are concerned."
Finally, the bank also stated that Alphabet's popularity is weak and its shareholding ratio is lower than other large stock companies. This, combined with a relatively low valuation, should lead to a significant increase in the stock in 2024.
Since the beginning of this year, Alphabet's stock price has risen by nearly 49%, slightly lower than the 50% increase of the Nasdaq 100 index.