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The stock market has been exhibiting immense volatility lately due to various macroeconomic and geopolitical factors. On Wednesday, the Federal Reserve raised its benchmark interest rate by 50 basis points, its biggest rate hike since 2000, to tame inflationary pressures. Given the growing concerns over skyrocketing inflation, the Fed’s hawkish tilt, a geopolitical crisis, rising COVID-19 cases in China, and deepening supply chain constraints, the stock market is expected to remain under pressure in the coming months.
Last month, the U.S. stocks experienced one of their worst selloffs. As a result, several quality mega-cap stocks are currently trading below their intrinsic values. Mega-cap stocks tend to deliver steady returns based on their broader market reach, pricing power, and strong fundamentals. Furthermore, mega-cap companies are more stable and can better withstand a market downturn than small- and mid-cap companies.
Given these factors, Wall Street analysts expect quality mega-cap stocks like Bank of America Corporation (BAC), Alphabet Inc. (GOOGL), Meta Platforms, Inc. (FB), and Amazon.com, Inc. (AMZN) to surge in price in the coming months.
Bank of America Corporation (BAC)
BAC in San Francisco, provides banking and financial products and services for individuals, small- and middle-market businesses, large corporations, institutional investors, and governments worldwide. The company operates through four business segments: Consumer Banking; Global Wealth & Investment Management; Global Banking; and Global Markets. It has a market capitalization of $302.46 billion.
Last month, BAC’s board of directors declared a $0.21 per share regular quarterly cash dividend on its common stock, payable on June 24, 2022. Also, it has declared a regular quarterly cash dividend of $1.75 per share on its 7% cumulative redeemable preferred stock, Series B, payable on July 25, 2022. This decision reflects BAC’s strong financial position and commitment to delivering a return on its earnings to shareholders.
In March, BAC and Alaska Air Group Inc. (ALK) extended their co-branded credit card agreement through 2030. “We are excited to announce this multi-year extension of our partnership with Alaska Airlines. This relationship continues to unlock growth opportunities for both Alaska and Bank of America, while driving greater loyalty and engagement with Alaska’s customers,” said Dean Athanasia, president of Regional Banking for BAC.
In its fiscal year 2022 first quarter, ended March 31, 2022, BAC’s total revenues amounted to $23.20 billion. Its net income from the Consumer Banking segment improved 11% from its year-ago value to $2.98 billion, while net income from Global Wealth and Investment Management rose 28.4% year-over-year to $1.13 billion. The company’s net interest income increased 13.5% year-over-year to $11.57 billion.
The $94.59 billion consensus revenue estimate for its fiscal year 2022, ending Dec. 31, 2022, represents a 6.2% increase from the previous year. The $3.32 consensus EPS estimate for its fiscal 2023 indicates a 17.7% year-over-year rise. It is no surprise that BAC has surpassed the consensus EPS estimates in each of the trailing four quarters.
The stock has declined 18.7% in price year-to-date and 9.3% over the past year and closed yesterday’s trading session at $37.54.
Among the 14 Wall Street analysts that rated BAC, eight rated it Buy, while six rated it Hold. The 12-month median price target of $48.15 indicates a 28.3% potential upside. The price targets range from a low of $42.00 to a high of $66.00.
Alphabet Inc. (GOOGL)
Mountain View, Calif.-based GOOGL offers online advertising services in the United States, Europe, Canada, Latin America, the Middle East, and Asia-Pacific. The company operates through three segments: Google Services; Google Cloud; and Other Bets. GOOGL provides technology and internet products and services, cloud-based collaboration tools, licensing, research, and development services. The company has a market capitalization of $1.54 trillion.
In March, GOOGL signed a definitive agreement to acquire Mandiant, Inc., a leading company in dynamic cyber defense and response, for $23.00 per share, in an all-cash transaction valued at $5.4 billion. Mandiant will join Google Cloud upon the close of the acquisition. With its addition, Google Cloud might deliver its end-to-end security operations suite with enhanced capabilities to customers.
Last December, GOOGL renewed a multi-year commercial agreement on similar terms with Opera Limited (OPRA) to distribute Google Search in Opera browsers. The renewal of this search agreement is expected to boost the company’s profitability.
GOOGL’s total revenues have increased 23% year-over-year to $68.01 billion in its fiscal 2022 first quarter, ended March 31, 2022. Its revenues from its Google Services segment rose 20.1% year-over-year to $61.47 billion, while its revenues from the Google Cloud segment grew 43.8% year-over-year to $5.82 billion. Its income from operations grew 22.2% from the year-ago value to $20.09 billion. And its net cash provided by operating activities improved 30.2% year-over-year to $25.11 billion.
Analysts expect GOOGL’s revenue for its fiscal year 2022 to come in at $299.31 billion, representing a 16.2% rise year-over-year. It has surpassed the consensus revenue estimates in each of the trailing four quarters. The Street expects the company’s EPS for its fiscal year 2023 to come in at $134.15, representing an 18.8% increase from the last year. Furthermore, the company has surpassed the consensus EPS estimates in three of the trailing four quarters.
The stock has plunged 19.7% year-to-date and closed yesterday’s trading session at $2,330.11.
Each of the 30 Wall Street analysts that rated GOOGL rated it Buy. The $3,270.47, 12-month median price target indicates a 40.4% potential upside. The price targets range from a low of $2,900.00 to a high of $4,118.00.
Meta Platforms, Inc. (FB)
FB Menlo Park, Calif-based leading social technology company. It enables people to connect and share with friends and family through mobile devices, computers, and in-home devices worldwide. The company operates through two segments: Family of Apps; and Reality Labs. The Family of Apps segment’s products include Facebook, Messenger, and WhatsApp. The Reality Labs segment offers a wide range of augmented and virtual reality-related products. It has a market capitalization of $563.67 billion.
On May 4, FB announced that it had launched new tools for small- and medium-sized businesses across Europe, the Middle East, and Africa. To make it easier and more convenient for companies to start conversations, the company is introducing ways to create Facebook and Instagram ads that start a WhatsApp Chat and expand lead generation and customer acquisition tools, including lead filtering with instant forms and gated content. These developments are expected to boost the company’s business growth and profitability.
For its fiscal year 2022 first quarter, ended March 31, 2022, FB’s total revenue increased 6.1% year-over-year to $27.91 billion. Its revenue from the Family of Apps segment improved 6.6% year-over-year to $27.21 billion. The company’s interest and other income grew 207.2% year-over-year to $384 million. In addition, its net cash provided by operating activities amounted to $14.08 billion, registering a 15% increase from the prior-year period.
The $126.69 billion consensus revenue estimate for 2022 represents 7.4% growth from the same period in 2021. Analysts expect FB’s EPS for its fiscal 2023 to be $14.01, representing a 16.9% rise year-over-year. The company has surpassed the consensus EPS estimates in three of the trailing four quarters.
Shares of FB have decreased 38.5% in price year-to-date and 39% over the past six months and closed yesterday’s trading session at $208.28.
Among the 37 Wall Street analysts that rated FB, 26 rated it Buy, 10 rated it Hold, while one rated it Sell. The 12-month median price target of $288.76 indicates a 38.6% potential upside. The price targets range from a low of $185.00 to a high of $466.00.
Amazon.com, Inc. (AMZN)
AMZN in Seattle, Wash., offers a wide range of products and services to customers in North America and internationally. The company operates through three segments: North America; International; and Amazon Web Services (AWS). It sells merchandise and content through physical and online stores purchased for resale from third-party sellers. It also manufactures, markets, sells electronic devices, and develops and produces media content. AMZN has a market capitalization of 1.18 trillion.
AMZN’s total net sales increased 7.3% year-over-year to $116.44 billion, while its net service sales grew 17.6% year-over-year to $59.98 billion in its fiscal year 2022 first quarter, ended March 31, 2022. Its net other income was valued at $8.69 billion for the first quarter. And the company’s net cash provided by investing activities and net cash provided by financing activities amounted to $906 million and $1.99 billion, respectively.
On April 21, AMZN’s Amazon Web Services, Inc. (AWS) announced the general availability of AWS Amplify Studio, a new visual development environment for creating web application user interfaces (UIs), Amazon Aurora Serverless v2 that scales thousands of transactions in a fraction of a second, AWS IoT TwinMaker, a new service to create digital twins of real-world systems, such as buildings, factories, industrial equipment, and production lines efficiently.
Also last month, AMZN unveiled Buy with Prime, a new benefit for Prime members that allows them to enjoy Prime’s trusted experience and benefits while shopping directly from merchants’ online stores. This is expected to extend the company’s customer reach and growth.
On April 5, AMZN entered agreements with Arianespace, Blue Origin, and United Launch Alliance (ULA) to provide launch services for Project Kuiper. This is AMZN’s initiative to increase global broadband access using a constellation of satellites in low Earth orbit (LEO). Over a period of five years, there will be up to 63 launches in total.
Analysts expect AMZN’s revenue for its fiscal 2022 third quarter, ending September 2022 to come in at $129.25 billion, representing a 16.6% rise year-over-year. The Street expects the company’s EPS for the next quarter to be $8.18, representing 33.6% growth year-over-year.
The stock has declined 26.9% in price over the past month and 28.8% over the past year. It closed yesterday’s trading session at $2,328.14.
Among the 38 Wall Street analysts that rated AMZN, 36 rated it Buy, one rated it Hold, while one rated it Sell. The 12-month median price target of $3,695.95 indicates a 58.8% potential upside. The price targets range from a low of $2,800.00 to a high of $4,655.00.
BAC shares were trading at $37.51 per share on Friday afternoon, down $0.03 (-0.08%). Year-to-date, BAC has declined -15.28%, versus a -13.02% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions. More...
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