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CMB starts Microsoft and Amazon at Buy

Published 22/02/2024, 21:30
Updated 22/02/2024, 21:30
© Reuters.

CMB International Capital Corp. initiated research coverage on the technological behemoths Microsoft (NASDAQ:MSFT) and Amazon (NASDAQ:AMZN) with a Buy rating.

For MSFT, CMB analysts believe the Windows maker remains the “consensus AI thematic pick” among global tech stocks thanks to its “cohesive product portfolio, exclusive partnership with OpenAI” and vast consumer and business customer bases, among other things.

“We are constructive on Microsoft’s long-term growth potential, and believe that Microsoft is poised for further market share gains for all its key product portfolio with the empowerment of generative AI,” wrote analysts.

CMB projects an annual revenue growth rate of 21% for Microsoft’s Intelligent Cloud (IC) segment from fiscal year 2023 to 2026.

Within this segment, it anticipates Azure's revenue to grow at a compound annual growth rate (CAGR) of 30%, fueled by a rise in user engagement and a significant increase in revenue generation from AI Cloud services.

“With the ramp-up of revenue generation from gen-AI and copilot, we are forecasting a FY23-26E total revenue CAGR of 15.8%, with total revenue to reach US$329.3bn in FY26, versus a revenue CAGR of 14.0% over FY20-23,” they said.

CMB set a target price of $473.60 for MSFT.

As for AMZN, the investment firm sees “ample potential” for the company’s e-commerce business in both the US and internationally.

Simultaneously, Amazon’s AWS cloud unit is supported by robust technological infrastructure, and the advent of generative AI presents additional growth prospects, CMB analysts said in the note.

“The continuous increase in retail business efficiency and improvement in economies of scale will help boost profitability in our view, backed by regionalization strategy, reduction in cost to serve, and rising revenue contribution from platform business,” they noted.

“Increase in revenue mix of relatively high-margin AWS business is likely to drive margin expansion for Amazon in the long run.”

CMB’s target price for AMZN sits at $213 per share.

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