Markets have been riding a roller-coaster lately, shaken by President Trump’s unpredictable, temperamental moves that keep investors on edge. Yet, amid the volatility, one thing remains steady: earnings season.
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There are some big names gearing up to release their first-quarter earnings, and with macro uncertainty still looming large, investors are approaching the season with caution. Cantor Fitzgerald’s Deepak Mathivanan, an analyst ranked in the top 1% of Street stock experts, believes the key may lie in adopting a more defensive stance.
“We think 1Q25E results should be relatively in-line to slightly below for large and mega-caps in Internet as the macro challenges surfaced largely by late 1Q25E. Meanwhile, 2Q25E outlooks should reflect the mixed effect of demand pull-in ahead of tariffs and cautious views of managements,” the 5-star analyst opined. “The good news is that buy-side expectations already reflect slowdown scenarios in some capacity for 2H25E. As such, given the lingering uncertainties on tariffs, we believe a defensive strategy with potential to play idiosyncratic themes is the right approach to generate alpha in 1Q25E earnings season.”
Within Mathivanan’s coverage universe, Amazon (NASDAQ:AMZN) and Alphabet (NASDAQ:GOOGL) stand out. As members of the ‘Magnificent 7,’ they were key drivers of last year’s rally. But heading into earnings, Mathivanan sees their paths diverging. So, between these two tech titans, which does he see as the better buy right now? Let’s find out.
Amazon
We’ll start with Amazon, the world’s largest e-commerce company and a major player in the field of digital services and cloud computing. This company is a proven success story; it started out as ‘the online bookstore,’ and after surviving the dot.com bubble of the late 90s, reinvented itself as the one-stop-shop in online retail. Today, Amazon’s customers can find virtually anything they want – and if Amazon doesn’t carry it, there’s a strong chance that a third-party seller, using the company’s platform, will have it. Amazon is even bringing AI into the game of meeting every customer’s needs, with a new ‘Buy for Me’ feature. This AI-powered shopping bot, now in beta testing mode, is designed to seek out items that Amazon’s customers can’t find on the site – and to help them make the purchase using Amazon’s platform.
All of this makes Amazon the absolute dominant player in the field of online retail, and world’s second-largest retailer of any stripe – only Walmart has higher retail revenues. Amazon’s online model will bring the company advantages in a difficult economic environment, however, as customers will look for both low pricing points and the convenience of e-commerce.
Amazon has succeeded in the crowded retail field for several reasons. It has built up an unparalleled warehouse network, allowing it to stock virtually any product of any type, and it has built up an equally unparalleled transport network, allowing it to get any of those products to any customer at any location, in the shortest time possible. The company’s scale allows it to cut back on price far more than most competitors, giving it another edge. And finally, Amazon has diversified far beyond the realm of traditional retail.
We’ve already mentioned the AI-powered shopping bot; Amazon also uses AI to enhance its popular cloud computing platform, AWS. AWS is already one of the company’s fastest-growing revenue generators, and with Google Cloud and Microsoft Azure is one of the world’s top three subscription cloud platforms. The addition of AI tech to the mix adds more tools and functionalities to the platform, including generative AI, AI automation, and app building tools. Amazon’s combination of AI and cloud services is putting the company in a solid position to compete successfully at the tech field’s cutting edge.
Amazon will report its earnings on May 1, and Wall Street’s prognosticators expect to see the company show $155 billion in quarterly revenue and EPS of $1.36. For now, we can look back to 4Q24 to see where the company stands.
In the final quarter of 2024, Amazon reported a top line of $187.8 billion. That total was 10.5% higher than the final quarter of 2023, and was $560 million better than had been expected. The company’s $1.86 EPS was 38 cents per share better than the forecast, and was up 86% year-over-year. We should note that Amazon’s 4Q results, coinciding with the holiday shopping season, tend to be the company’s highest of the year.
Drilling down to the details, we find that AWS, the cloud platform, generated 15.3% of Amazon’s total revenues, or $28.8 billion. The segment realized a year-over-year revenue gain of 19%.
For Cantor’s Mathivanan, Amazon’s combination of strengths adds up to a solid outlook. He writes, “We think AMZN stands to benefit the most over the medium term in the form of share gains in both retail and cloud from faster speed, broader selection, and service reliability vs. competition. The company’s ongoing efforts to improve logistics efficiency should help minimize impact on margins. While tariffs are undoubtedly a disruptive development for AMZN, we think the company should see share gains from offline retail as consumers consolidate their spend during weaker macro on channels that offer broad selection and ease of use. The company also has several idiosyncratic themes (including retail efficiency gains) that should help FY25E/26E KPIs. At 25x our FY26E EBIT estimates reflect macro slowdown (near the 2-yr trough). We like the medium-term risk/reward for shares.”
Quantifying his stance, the analyst gives AMZN shares an Overweight (Buy) rating, with a $230 price target that implies a one-year potential gain of 27%. (To watch Mathivanan’s track record, click here)
This retail/tech leader has picked up 46 recent reviews from the Street’s analysts, and the lopsided 45 to 1 split favors Buy over Hold for a Strong Buy consensus rating. The stock is currently trading for $180.6 and its average target price of $246.70 suggests that an upside of 36.5% is in store for the coming year. (See AMZN stock forecast)
Alphabet
Now we’ll turn to Alphabet, the parent company of both Google and YouTube. That would be a solid foundation for any internet stock, and it gives Alphabet effective dominance in the online search niche.
Alphabet derives most of its revenue from online advertising ventures. The success of this model can be seen in its ad revenues, which in 4Q24, the last period reported, came to $72.5 billion. That figure, which included ad revenue from Google search, YouTube ads, and Google Network, made up the lion’s share, approximately 75%, of Alphabet’s $96.5 billion in total revenue for the quarter. The quarter’s revenue was up 12% year-over-year – but it did miss the forecast by $170 million. Q4 earnings, reported as $2.15 per share, beat the estimates by 2 cents per share. Alphabet finished 2024 with $350 billion in revenue, for a 15% year-over-year gain.
Looking ahead to the 1Q25 results, which are scheduled for release today (April 24) after the markets close, Alphabet is expected to report a quarterly top-line of $89.17 billion and $2.01 at the bottom-line. The dip from Q4 to Q1 will be in line with the company’s established pattern of reporting its strongest top-line results in the last quarter of the year.
In an important development that investors should note, Alphabet is facing headwinds in the form of an antitrust action from the US Department of Justice. The company is the target of a DOJ lawsuit that began this past Monday, in which the Department is seeking to prevent the company from using AI products to expand its dominance of the online search niche. The DOJ has compared its suit to famous antitrust actions of the past, particularly those that targeted – and broke up – Standard Oil and AT&T. The company argues that its AI products are outside the scope of its search engine business, but in an indication that it does not feel confident in the trial outcome, Alphabet has already said that it will appeal the ruling.
This company presents a mixture of strengths and vulnerabilities, and the tug-of-war between them forms the core of Mathivanan’s notes on GOOGL. He writes of this tech giant, “GOOGL’s broad category mix in the search business should provide some degree of resiliency to tariffs vs. other companies in digital ads. However, the core ads business should see deceleration in a weakening macro. Additionally, the future of Search in an AI Agent era is unclear. As we have discussed previously, we think the shift to agents from assistants will be more profound, and search stands to lose the most if consumers increasingly use agents for commercial activities. On the Antitrust front, we do not see the possibility of favorable settlements for GOOGL during the remedy trial phase in the next few months.”
Mathivanan goes on to rate GOOGL shares as Neutral, and he gives the stock a $159 price target that suggests the stock will stay rangebound for the time being.
Overall, Alphabet’s stock has 37 recent ratings, including 27 Buys and 10 Holds, for a Moderate Buy consensus. The stock’s $155.35 share price and $195.09 average target price together imply a 12-month upside of 25.5%. (See GOOGL stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
