Rating Quick Look | Wall Street is "fighting" for Alphabet-C and AMD? But unanimously optimistic about Microsoft!

Citigroup: Maintains "Buy" rating on AMD, raises target price from $136 to $192, believes the stock's sell-off presents a buying opportunity.

The bank pointed out that AMD's revenue in the fourth quarter of last year was $6.17 billion, a 6% increase QoQ, higher than the market and the bank's expectations of $6.11 billion and $6 billion, mainly due to the growth in data center sales. Gross margin for the quarter was 50.7%, a 20 basis point decrease QoQ, lower than the market and the bank's expectations of 51.5%. Earnings per share were $0.54, also lower than the market and the bank's expectations of $0.57 and $0.58, mainly due to the decline in gross margin and increased expenses.

In addition, AMD lowered its guidance for the first quarter of this year, expecting a 12% QoQ decrease in revenue to $5.4 billion, lower than the market's expectation of $5.7 billion and lower than the bank's original expectation of $5.9 billion. However, the company raised its sales guidance for the MI300 artificial intelligence (AI) chip for this year from the original expectation of $2 billion to over $3.5 billion, while the bank predicted that the chip's sales would exceed $5 billion this year and could reach over $8 billion next year.

The bank lowered its revenue forecast for AMD this year from $26.3 billion to $25.7 billion, and also lowered its earnings per share forecast from $3.20 to $2.75. However, the bank raised its revenue forecast for the company next year from $29.5 billion to $32.5 billion, and its earnings per share forecast from $4.38 to $5.04. It is estimated that the revenue and earnings per share could reach $39 billion and $6.85 in 2026.

UBS: Maintains "Buy" rating on AMD, lowers target price from $220 to $205.

The bank pointed out that AMD's guidance was slightly lower than investors' expectations, as the adjustment in gaming was larger than expected and overshadowed the strong AI momentum, resulting in official guidance lower than market expectations.

The bank stated that data centers and artificial intelligence are still key investments, and as this momentum continues to grow, AMD's continuous improvement in its AI revenue target will bring ideal performance and guidance.

The bank stated that the group's server CPU revenue met expectations, with both quantity and average price increasing, and market share remaining basically unchanged. In addition, the new generation Turin is expected to be launched later this year.

Bank of America: Lowers Google's target price from $175 to $173, reiterates "Buy" rating.

The bank stated that Alphabet, Google's parent company, exceeded expectations in revenue and earnings per share in the last quarter, mainly due to the growth of Google Cloud and subscription services, as well as the reduction in tax expenses. All major businesses grew faster YoY during the period, except for the search engine business, and with the expected significant increase in capital expenditures, it is believed that there will be negative impacts.

Bank of America lowered its revenue forecast for 2024 and 2025 to $289.092 billion and $321.615 billion, respectively, and added a revenue forecast for 2026 of $354.475 billion, with earnings per share forecasts of $8.51, $9.67, and $10.84, respectively. The bank stated that its revenue and earnings per share forecasts for the first quarter of 2024 remain basically unchanged, while the full-year capital expenditure expectation has been raised to $45 billion. With the accelerated growth of all major businesses and the integration of generative AI as the core AI asset, Alphabet is believed to be a beneficiary of AI development.

Citigroup: Maintains "Buy" rating on Alphabet, raises target price from $153 to $168

The bank pointed out that although Alphabet's fourth-quarter revenue exceeded market expectations by 1%, the market is concerned about the growth of its search business. The bank is encouraged by the reacceleration of the company's Google Cloud business growth and the apparent presence of generative artificial intelligence (GenAI) in most of the company's products, which has long-term positive factors.

The bank believes that the overall trends of Google Cloud, YouTube, and subscriptions are continuously improving, and cost efficiency is constantly increasing.

Citigroup: Raises target price for Microsoft to $480, reiterates "Buy" rating

The bank stated that Microsoft achieved healthy revenue and exceeded profit expectations, and its cloud business continued to remain stable, further demonstrating the contribution of GenAI. Although the bank does not believe that the second-quarter performance is groundbreaking, the most impressive aspect may be the continuous improvement in profitability and the accelerating monetization of GenAI.

The bank pointed out that some of Microsoft's new monetization initiatives (such as M365) are still in the early stages, which makes it more confident in the company's medium- to long-term development prospects. With the growth of Azure revenue and the strengthening of profitability discipline, the target price has been raised from $470 to $480.

Citigroup reiterates a "Buy" rating on Microsoft because it believes that the company's leading position in the GenAI field and multiple monetization channels will continue to drive accelerated revenue and profit growth, and will continue to bring higher returns than peers.

Bank of America: Raises target price for Microsoft to $480, maintains "Buy" rating

The bank stated that Microsoft's second-quarter performance was solid, and the performance was driven by increased AI applications. Revenue during the period increased due to the promotion of cloud service Azure, with Azure revenue increasing by 28% YoY, exceeding the upper limit of the guidance range, mainly benefiting from the increase in usage of OpenAI and Microsoft AI.

The commercial office business grew by 16% YoY, in line with expectations, and the strong performance of E5 software offset the sales pressure on office software from the macro environment. Microsoft's third-quarter guidance is lower than market expectations, mainly due to weaker gaming prospects, but the core Azure and Office prospects remain stable. Microsoft is the bank's top choice in the US software industry.

Goldman Sachs: Maintains "Buy" rating on Apple, target price of $223

The bank pointed out that Apple's earnings per share for the first quarter of the 2024 fiscal year were $2.18, exceeding the bank's and market expectations of $2.1. This was mainly due to better-than-expected revenue driven by the iPhone, with a gross margin of 45.9%, surpassing the market's expected 45.5% and the company's guidance of 45% to 46%. Apple's operating expenses for the quarter were $14.5 billion, in line with the market and the company's guidance of $14.4 billion to $14.5 billion.

In addition, the company's services revenue was $23.1 billion, an 11% YoY increase, roughly in line with expectations. The company repurchased $23 billion during the quarter, compared to $21 billion in the fourth quarter of the 2023 fiscal year. However, the company's revenue in the Greater China region for the quarter was $20.8 billion, lower than the market's expected $23.5 billion, and the region may face increased competition and economic slowdown. The bank believes that the risks facing the company include weakened consumer demand for products and services, supply chain disruptions, intensified competition, regulatory risks, and issues with capital allocation execution.

JPMorgan: Maintains "Overweight" rating on Baidu Group-SW, target price of HKD 210

The bank maintains Baidu's 2024 core adjusted operating profit margin (OPM) at 25% and temporarily predicts that the revenue contribution of generative AI in 2024 will be RMB 9 billion, believing that it is still not fully reflected in the stock price.

In the process of monetizing generative artificial intelligence (gen-AI), the market has an asymmetric view on the company's valuation prospects, and the current stock price is believed to be attractive. The bank believes that the macroeconomic outlook in mainland China in 2024 is a key factor determining Baidu's stock price, and it believes that high-profit revenue from AI monetization will bring room for profit margin improvement.