JPMorgan's Top Tech Picks for Q2 Earnings: Amazon, Uber, and Google

Q2 Earnings Preview: Why Amazon, Uber, Google Are JPMorgan's Top Picks - Alphabet (NASDAQ:GOOGL), Uber Technologies (NYSE:UBER), Amazon.com (NASDAQ:AMZN)

Strategic growth and strong financials make these tech giants standout choices for investors. As the Q2 earnings season approaches, Amazon.com Inc AMZN, Uber Technologies Inc UBER, and Alphabet Inc GOOG GOOGL, Google's parent company, are emerging as standout picks. JPMorgan analyst Doug Anmuth highlights Amazon, Uber, and Google as top picks as we approach the Q2 2024 earnings season. Despite the mixed performance of the internet sector so far this year, Anmuth remains optimistic about these large-cap names, even as some concerns about elevated expectations and potential consumer spending slowdowns in the second half of the year persist. Let's dive into what makes each of these stocks the analysts' top picks: Amazon: Steady Growth and Strong Free Cash Flow Amazon remains Anmuth's favorite stock, both in the near and long term. The company is well-positioned for continued growth in its core areas, including Amazon Web Services (AWS) and its retail operations. Anmuth anticipates a near-term acceleration in AWS, with a projected 20% growth in Q4 2024, driven by easing optimizations, new workload migrations, and the ramping of GenAI monetization. He expects Amazon's North America operating income (OI) margin to expand by 190 basis points in 2024, supported by improvements in shipping and inventory placement, automation, and advertising. Amazon's free cash flow is projected to reach $66 billion in 2024 and $86 billion in 2025. For Q2, Anmuth says investors expect net sales of between $148 billion and $150 billion and operating income of $14 billion to $15 billion or more. Read Also: Tesla Threat Reduced For Uber And Lyft , Stocks Also Benefit from Higher Prices and Shorter Wait Times: Analyst Google - GenAI Offensive, Margin Expansion Google's strong performance is highlighted by its offensive stance in Generative AI (GenAI), meaningful margin expansion, and a favorable advertising backdrop. The company's stock is near all-time highs and continues to benefit from strong Search and YouTube revenue growth. Google's progress in GenAI, coupled with better-than-expected ad revenue, has boosted investor sentiment. Anmuth's projections for Alphabet include a 13% year-over-year FX-neutral revenue growth and a GAAP operating income margin of 30.8%, reflecting a 140 basis point improvement. However, the upcoming decision on the DOJ search distribution trial remains a significant concern. Uber - Resilient Demand, Profitability Initiatives Uber stands out in the rides and food delivery sector, which has faced recent pressures due to various factors, including noise around Tesla Inc's robotaxi event and weaker restaurant traffic data. Despite these challenges, Uber's rideshare indicators remain strong, with accelerating MAU growth potentially driving further mobility growth. Anmuth highlights Uber's commitment to profitability and shareholder returns. The company has consistently beaten its EBITDA guidance and recently emphasized greater accuracy in its projections. Uber has also initiated a buyback program, with Anmuth estimating a $7 billion buyback over three years, possibly completed in two years. For Q2, Uber's rideshare business is expected to show a 26% year-over-year growth in gross bookings, while the food delivery segment may face some pressure from weaker restaurant traffic, potentially affecting the 17.5% year-over-year growth forecast for delivery gross bookings. Anmuth remains positive on the internet sector as a whole, noting the bifurcated performance year-to-date, with a market cap-weighted average gain of 30% versus a 3% decline in the overall coverage universe. As the earnings season kicks off, investors will be closely watching these large-cap internet names for their continued growth and resilience amid evolving market dynamics. Amazon, Uber, and Google are well-positioned heading into Q2 2024 earnings, supported by solid underlying trends, strategic growth initiatives, and strong financial performance, making them top picks for investors according to JPMorgan. Read Next: Google's 'Poker Move' With Wiz Could Be The Kickoff For Big Tech M&A In 2025: Analyst Image created using artificial intelligence via Midjourney. Market News and Data brought to you by Benzinga APIs

JPMorgan's top tech analyst likes Amazon and 2 other stocks heading into earnings

JPMorgan highlighted Amazon as its best idea going into the second-quarter earnings season for technology stocks, followed by Uber and Google . Netflix 's earnings report, due out postmarket Thursday, marks the beginning of earnings for the internet sector. JPMorgan analyst Doug Anmuth wrote that the Wall Street bank remains bullish on larger players in the industry, for now. "We continue to prefer large-cap names, though we recognize pockets of concern around elevated expectations, higher valuations, & potential slowdown in 2H consumer spending," he wrote. The analyst highlighted Amazon as his favorite stock for the near- and long-term. Although the e-commerce stock is "well-owned," he pointed to Amazon's rapid secular growth as a catalyst. For instance, Amazon Web Services could accelerate due to new workload migrations and increased generative artificial intelligence monetization. "We believe Amazon's flexibility in pushing first-party vs. third-party inventory and the Prime membership serve as major advantages in its Stores business, and its multi-year head start in the cloud has led to ~35% AWS global market share," the analyst wrote. "High-growing AWS and Advertising revenue streams are AMZN's most profitable businesses, further supporting margin expansion & FCF generation." Anmuth added that Amazon seems on track for multi-year margin and free cash flow expansion. Amazon stock has gained 27% this year. The analyst's price target of $240 implies that shares could rally another 25% from here. Anmuth also highlighted Uber as a top pick stock, citing its market leadership in the ride-sharing and food delivery industries, alongside its ability to leverage its scale to rapidly launch new products. The analyst believes Uber also has the ability to weather some near-term macroeconomic volatility due to increased Uber One and food delivery adoption, higher customer retention, strong balance sheet, ability to expand in other markets and strong potential free cash flow generation. "We are confident in Uber's ability to drive strong multi-year growth across the business, while delivering increasing levels of EBITDA & FCF, & returning capital to shareholders," Anmuth wrote. "For Delivery, we think consumers have remained resilient, and we expect Delivery GB growth to remain stable Q/Q aided by partnership with Costco, as well as Instacart which could help offset any weakness in core food delivery." Uber stock is up nearly 4% in 2024. Anmuth's $95 price target is approximately 31% above where shares closed Monday. Alphabet was JPMorgan's third pick in the internet sector. Both the company's Class A and Class C shares are up 32% year to date. JPMorgan's $200 price target implies that the shares could respectively climb 7% and 6%. As catalysts, Anmuth cited the Google and YouTube owner's solid fundamentals and status as a beneficiary of generative AI and an increasingly digital economy. "Google remains focused on innovation, and we continue to believe there is healthy runway across Search and YouTube ads as AI drives higher ROI & TV dollars shift online," the analyst wrote. "We remain confident in the company's ability to innovate around Generative AI, control costs, & generate solid top-line growth." -- CNBC's Michael Bloom contributed to this report.