AAPL

AAPL, AMZN, or NVDA: Which "Strong Buy" Mega-Cap Tech Stock Could Deliver the Best Returns?

With stock market volatility continuing to weigh on investors’ decisions, it would be prudent to consider some mega-cap stocks (stocks with market capitalization of over $200 billion), which have well-established business models, solid fundamentals, and are among the leading players in their respective industries. Using TipRanks’ Stock Comparison Tool, we placed Apple (NASDAQ:AAPL), Amazon (NASDAQ:AMZN), and Nvidia (NASDAQ:NVDA) against each other to find the most attractive mega-cap tech stock as per Wall Street analysts.   

Apple Stock (NASDAQ:AAPL)

The revenue of iPhone maker Apple has declined for four consecutive quarters, as macro challenges have impacted customers spending on big-ticket discretionary items. While Apple exceeded analysts’ fiscal fourth-quarter expectations due to higher iPhone and Services revenues mitigating the weakness in Mac and iPad sales to quite an extent, investors were disappointed with the company’s December quarter guidance.

Management expects the fiscal first-quarter top line to be similar to the prior-year quarter’s revenue. However, Wall Street expected the company to return to revenue growth of 5% in the crucial holiday season quarter. Management’s commentary clearly indicated the impact of macro pressures on Apple’s products. 

Is Apple a Buy, Hold, or Sell?

On Tuesday, Keybanc analyst Brandon Nispel noted that the demand for some iPhone models is slowing. Keybanc’s October survey revealed the substantial slowdown in the demand for Apple's iPhone 15 and Plus models, partially offset by healthy demand for the iPhone 15 Pro and Pro Max.

Moreover, Nispel pointed out that store inventories increased meaningfully above last year's iPhone 14 inventory levels. Also, Keybanc’s "First Look Data" reflects weaker iPhone sales compared to historical trends.

Overall, Nispel expects Apple's fiscal first-quarter revenue growth to be in line with last year. He highlighted that the lack of product releases in October and the later-than-typical iPhone release in September could also hit sales. He also expects lower upgrade rates and softer customer demand to pressure Hardware revenues.

With 25 Buys and eight Holds, Wall Street has a Strong Buy consensus rating on Apple stock. The average price target of $201.99 implies 6.3% upside. Shares have advanced more than 46% so far in 2023.  

Amazon.com Stock (NASDAQ:AMZN)

E-commerce and cloud computing behemoth Amazon has impressed investors by reporting better-than-anticipated earnings for the first three quarters of 2023 despite a tough macro backdrop. In Q3 2023, the company reported solid growth in its retail segment, cloud computing unit Amazon Web Services (AWS), and advertising business.

Amazon’s aggressive cost-cutting and streamlining measures have helped the company boost its profitability. In Q3 2023, the company’s operating margin expanded to 7.8% from 2.0% in the prior-year quarter. Management is optimistic about future growth prospects, driven by artificial Intelligence (AI) tailwinds in AWS business, dominant e-commerce business, and the growing ad revenue.

Is Amazon Stock a Good Buy Now?

Earlier this month, UBS analyst Lloyd Walmsley raised his price target for Amazon stock to $180 from $178 and reaffirmed a Buy rating. The analyst noted Amazon’s solid Q3 performance led by strong margin improvement in North America retail, International retail, and AWS segments. Also, the analyst highlighted the acceleration in ad revenue and upbeat Q4 outlook.

He added that management's tone on the conference call was positive about continued retail margin expansion but disappointing about near-term AWS growth re-acceleration. Overall, Walmsley maintained Amazon as his top idea in the Internet market.

Like Walmsley, other analysts covering Amazon are also bullish about the tech giant, with the stock scoring a Strong Buy consensus rating. The average price target of $175.51 implies about 20% upside potential. Shares have advanced 75% year-to-date

Nvidia Stock (NASDAQ:NVDA)

Semiconductor giant Nvidia is enjoying a phenomenal run this year, thanks to a spike in demand for its graphics processing units (GPUs) due to the generative AI wave. Nvidia recently reported its fiscal third-quarter results, which trounced Wall Street’s estimates but fell short of shareholders’ lofty expectations.

Also, investors are concerned about the impact of the Biden administration’s restrictions on advanced chip exports to China. Nonetheless, the company is highly optimistic about the road ahead, as it believes that “Generative AI is the largest TAM [total addressable market] expansion of software and hardware that we've seen in several decades.”  

What is the Price Target for Nvidia Stock?

On Wednesday, JPMorgan analyst Harlan Sur increased the price target for Nvidia to $650 from $600 and reiterated a Buy rating on the stock. Sur highlighted that the company’s Q3 beat was on top of a higher revenue base.  

Sur added that Nvidia’s guidance of a 10% sequential revenue growth reflects continued strong spending by its customers to support their AI initiatives. Sur stated that Nvidia managed to report market-beating Fiscal Q3 results, driven by the "massive demand pull" for its data center products. The analyst increased his estimates following the print.

Nvidia earns Wall Street’s Strong Buy consensus rating based on 30 Buys and three Holds. The average price target of $660.39 implies 38.2% upside, even after a staggering 227% year-to-date rally.

Conclusion

Wall Street is highly optimistic about the three mega-cap tech stocks discussed here. That said, among the three tech giants, analysts see the highest upside in Nvidia stock even after a stellar generative AI-induced year-to-date rally this year. As per TipRanks’s Smart Score System, Nvdia scores a “Perfect 10,” which implies that the stock has the capability to outperform the broader market over the long term.

Disclosure

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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