Ahead Of Earnings Analyst Boosts Amazon Amid Strong Ad Spending, Keeps Faith in Google's Ad Revenue Growth

Mizuho analyst James Lee reiterated a Buy rating on Amazon.Com Inc AMZN with a price target of $180. Lee maintained a Buy on Alphabet Inc GOOGL Google with a price target of $150.

Mizuho's ad tracking from leading ad platforms shows consumers remained relatively resilient this quarter, with both platforms gaining market share. 

Lee sees Amazon's advertising tracking ahead of expectations, with e-commerce revenue growth compared favorably against consensus. At the same time, the October Prime Day is off to a strong start, growing 30% YoY for ad spending, a proxy for e-commerce revenue growth. 

Lee projects 3Q revenue and EPS of $142.34 billion (prior $141.39 billion) vs. consensus $134.21 billion and $0.62 vs. consensus $0.55.

As for Google, the ad tracking was solid. He expected advertising revenue to be in line or modestly above consensus, but consensus operating expenditure growth for 2H23 appears aggressive without meaningful cost cuts. 

For the mega tech names, Amazon is Lee's top pick into the quarter due to positive e-commerce checks, negative sentiment on AWS, and overstated concerns relating to competition such as Temu. 

For Alphabet, he said that risk and reward are balanced to mixed into the quarter, with solid ad checks offset by positive investor sentiment and optimistic operating expenditure expectations.

Lee projects 3Q revenue and EPS of $75.51 billion (prior $75.44 billion) vs. consensus $72.06 billion and $1.43 vs. consensus $1.37.

Price Actions: AMZN shares traded lower by 1.72% at $126.19 on the last check Friday.