Comprehensive Equity Analysis: Alphabet, Amazon, Apple, and Microsoft – Insights from OCBC Investment Research

Date of Report: 25 November 2024

Broker: OCBC Investment Research

Alphabet Inc: Dominating the Digital Realm

Alphabet Inc., a titan in the digital world, continues to command significant attention from investors and regulators alike. As of late November 2024, OCBC Investment Research maintains a “Buy” rating for Alphabet, with a fair value set at USD 211.00, despite closing at USD 166.57. The company’s vast empire spans Google Services, Google Cloud, and Other Bets, with Google Search capturing over 90% of the global market share. This dominance, however, has attracted scrutiny from the Department of Justice (DOJ), which has proposed stringent remedies in the ongoing antitrust case against Google Search.

Key DOJ Proposals

• Divestiture of Chrome and Potentially Android: Google may be required to divest Chrome and refrain from re-entering the browser market for five years, with a possible divestiture of Android if behavioral remedies fail.
• Prohibition on Exclusionary Agreements: Google is urged to avoid agreements that exclude rival search engines and incentivize default placements.
• Data Access to Competitors: Google must share its search index and user data with competitors for ten years, aiming to lower entry barriers.
• Choice Screen and Transparency: Google is required to implement a choice screen for users and increase transparency in its advertising processes.

Alphabet’s financial performance remains robust, with projected revenues of USD 346,752 million in FY24 and USD 388,205 million in FY25. Despite potential legal challenges, the company is expected to lean on its strong fundamentals and provide counter proposals that might be less aggressive than anticipated. Investors are advised to consider ongoing uncertainties, including changes in DOJ leadership, which could impact Google’s share price and operational strategies.

Amazon.com Inc: A Colossus in E-Commerce

Amazon.com Inc., a leader in e-commerce and cloud computing, continues to show promising growth. The company’s projected Price/Earnings (P/E) ratios for FY24 and FY25 stand at 38.3 and 32.1, respectively. Amazon’s strong market presence is reflected in its robust financial metrics, including significant revenue growth and operating profit margins.

Despite its strong market position, Amazon faces challenges such as potential larger-than-expected capital expenditures, which could impact operating margins. Additionally, the company must navigate an increasingly competitive AI landscape and uncertainties in the macroeconomic environment.

Apple Inc: Innovating at the Forefront

Apple Inc., renowned for its innovative products and loyal customer base, continues to deliver impressive financial performance. With a P/E ratio of 31.1 for FY24 and 27.7 for FY25, Apple maintains a strong position in the technology sector. The company’s Price/Book ratio highlights its robust financial health and market confidence.

Apple’s strategic initiatives in product innovation and market expansion are key drivers of its continued success. However, the company must remain vigilant in managing its operating expenses and capitalizing on emerging market opportunities to sustain its growth trajectory.

Microsoft Corp: Leading in Cloud and Software Solutions

Microsoft Corp., a dominant player in software and cloud services, showcases strong financial metrics with P/E ratios of 32.0 for FY24 and 27.9 for FY25. The company’s comprehensive suite of products and services, including Azure and Microsoft 365, positions it favorably in the competitive tech landscape.

Microsoft’s strategic focus on cloud innovation and enterprise solutions is expected to drive continued growth. The company must, however, address potential challenges such as increased competition in the cloud space and evolving regulatory landscapes that could impact its operations.

Conclusion

The equity research report by OCBC Investment Research provides a detailed analysis of four major technology companies: Alphabet, Amazon, Apple, and Microsoft. Each company exhibits strong market positions and promising growth prospects, albeit with unique challenges and regulatory considerations. Investors are encouraged to consider both the opportunities and risks associated with these industry leaders as they navigate the dynamic technology landscape.