Real bargains on Wall Street, Barron's point to, i.a. Google and Amazon as undervalued stocks
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Among the 10 great investment opportunities for 2023, identified by analysts of the famous portal Barron's , were Alphabet and Amazon. 2022 was not a good year for the stock market. The S&P 500 fell by about a fifth, and many large, solid companies lost much more on valuation. The famous investor portal Barron's decided to make an interesting list of important and highly undervalued companies from the American stock exchange, and we decided to take a look at them in search of interesting indications.
Alphabet needs weight loss
It turned out that Barron's list includes well-known, large technology companies: Alphabet and Amazon. And that's what caught our attention. Big Techs were heavily discounted due to the rising cost of money - the Fed had no mercy when it came to tightening monetary policy.
10 bets of Barron's for 2023
Source: Barron's
Let's start with Google's parent company, whose valuation has fallen by a third in the past year. Its revenue growth slowed, and investors worried about the decline in advertising on the famous search engine. At $95, Alphabet 's stock is currently trading at 18x its 2023 earnings projections, and the P/E ratio will be even lower when you factor in losses at other companies, including Waymo , the leader in self-driving vehicles.
Barron 's columnists point out that famous investors Joe Rosenberg and Chris Hohn recently raised the issue of high costs, and even wrote a letter to the president of Alphabet Sundar Pichai . It may be hard to believe, but employment at Alphabet has doubled since 2018. Certainly, Alphabet needs "weight loss".
Alphabet should also pay dividends, something that is typical of a mature and profitable company that went public 18 years ago, Barron's analysts stress .
Alphabet quotes
Source: Trading View
Amazon needs to start making money in the retail segment
Online retail giant Amazon has halved its valuation in 2022, from $1.7 trillion to $834 billion. No one expected this at the beginning of January.
This happened not only because of the rate hikes, but also because of the slowdown in sales of cloud-computing services . But according to Barron's analysts, the coming year should be better as Jeff Bezos ' company cuts costs and increases the efficiency of its online operations. In the last 3 years, it has invested USD 80 billion in its development.
Barron's notes the opinion of SVB MoffettNathanson analyst Michael Morton, who recently started watching Amazon and admittedly gave "overweight" with a price target of $118, but estimated that Amazon 's retail segment has negative operating margins after excluding lucrative ad revenue. He stressed that Amazon needs to make a profit in its retail business if it is thinking of increasing its stock market valuation.
With 50x next year's profits, Amazon's stock isn't cheap, but few companies have two dominant businesses with so much value and such good prospects, Barron's columnists point out . In the case of Bezos , the other leg is the profitable cloud business Amazon Web Services, which has great growth potential, according to Barron's analysts.
Amazon quotes
Source: Trading View
