According to Scott Kessler, an analyst at CFRA, the four technology stocks that investors should focus most on are Amazon, Facebook, Apple and Alphabet. In the opinion of the analyst the four firms are more representative of the industry in terms of opportunity and risk, power, success and size.
Though Kessler has issued a buy rating for all the four stocks, he is of the view that Alphabet holds the most potential. This conclusion was made after an analysis of the firm’s market shares and users was conducted. The seven categories in which they were ranked in were regulatory, legal and international risks, video, cloud, and mobile.
Score of 12
With 7 being the highest score and 28 the lowest score, Google achieved a score of 12 and thus emerged the top despite the regulatory issues that are constantly cropping up especially in Europe. Apple scored 20 and was the last in the group while Amazon and Facebook were in second place having scored 19 points.
“Alphabet ranked #1 or #2 in the first six categories, and we point to leadership in areas like mobile (noting Android and popular apps), video (YouTube), traditional area(s) of focus (search and advertising) …” wrote Kessel in the research note.
Apple never managed to lead in any category and this was attributed to the company’s relative weakness particularly with regards to emerging opportunities. In the case of Facebook, the weakness of the social media giant was exposed in video and cloud where it was deemed to have strategies that weren’t clear.
Amazon’s weakness lay in mobile with its Fire phone having turned out to be a big flop. The online retail giant also performed dismally in the international category as only 30% of last year’s revenues were generated from outside the United States. This was lower vis-à-vis other tech companies.
The poor performance internationally of Amazon is coming at a time when the Chinese equivalent of Amazon has been doing better with regards to financial and stock performance. In the last 12 months for instance shares of Alibaba have appreciated by over 75% whole those of Amazon have only increased by 26%.
Part of the reason is the fact that Alibaba’s business model enjoys more profitability than Amazon’s which results in the Chinese retail giant generating high operating margins. Alibaba also enjoys a bigger domestic market since there are more than half a billion internet users in China, twice that of the United States.