Recap| James Ooi: Can AI Boost Tesla, Amazon, and Apple Earnings?

[Heart]Hello Tigers

Below is a recap of analyst @Tiger_James Ooi ‘s webinar, “Can AI Boost Tesla, Amazon, and Apple Earnings?”

Please click here to watch the full webinar replay on Tiger Brokers App.

We have split the live video content into three articles based on the core topics. Tigers are welcome to click to view the details as needed.

1) James on 2Q 2024 Earnings Preview : Can AI boost Tesla?

2) James on 2Q 2024 Earnings Preview: AI Can Boost AMAZON

3) James on 2Q 2024 Earnings Preview: Can AI Boost AAPL?

Next, we will make a core summary of the analysts' views, hoping to help you quickly get the core views of the analysts:

1. Q224 Earnings Date

• $Tesla Motors(TSLA)$ will report 2Q2024 earnings on July 23rd after the market close.

• $Amazon.com(AMZN)$ is expected to report earnings on the second week of August after market close.

• $Apple(AAPL)$ will release its latest earnings results on August 1st.

2. Q2 Earnings expectations

• Wall Street currently estimates quarter-on-quarter and year-over-year growth in revenue and operating income in 2Q2024, suggesting the worst is over for $Tesla Motors(TSLA)$ . The gross profit margin and operating margin forecasted by analysts might be a bit conservative, as James also expects some upside surprises this quarter due to the growth in Energy Generation and Storage.

• $Amazon.com(AMZN)$ Revenue is expected to grow 10% year-over-year in the Q224, and operating income is expected to grow 79% year-over-year. Operating margin is expected to decline to 9.25% this quarter compared to 10.68% one quarter earlier. Interestingly, 10.68% is also the highest operating profit margin Amazon has ever achieved.

• $Apple(AAPL)$ Wall Street is still expecting low single-digit year-over-year growth in both revenue and operating income for the June and September quarters. Gross margin and operating margin are expected to dip slightly in the June quarter but remain 1-2 percentage points higher than the same quarter one year ago.

3. Current Challenges

• The biggest downside risks are that Elon Musk may not obtain the 25% voting rights, and $Tesla Motors(TSLA)$ still needs to challenge the judge again in a hearing in the coming weeks regarding Elon Musk's $56 billion pay package.

• The biggest downside risk for Amazon is intense e-commerce competition. To compete with these Chinese players, $Amazon.com(AMZN)$ intends to launch an online storefront for low-priced products in the next few months. It will also ship products directly to customers from China. The US intends to close the De Minimis Tax Loophole that helps Temu and Shein keep prices so low. Thus, Chinese e-commerce players may suffer from lower profit margins in the future as they compete with Amazon.

• $Apple(AAPL)$ now boasts the largest installed base in history and the longest delayed upgrade cycle—the longest period iPhone users have gone without upgrading their phones. Apple hasn't introduced anything as exciting as Apple Intelligence in a long time, so James reckon we will see a multi-year iPhone upgrade cycle. Apple's stock still appears attractive.

4. Bloomberg Analysts Consensus Target price

• The current Bloomberg Analysts Consensus 12-month target price for $Tesla Motors(TSLA)$ is $203.74, representing a downside potential of 19.4%.

• The current Consensus 12-month Target Price for $Amazon.com(AMZN)$ is $222.61, indicating an upside potential of 15.5% relative to the closing price of $192.72. James maintains a positive outlook on Amazon,

• The current Analysts' Consensus 12-month Target Price for $Apple(AAPL)$ is $221.31, representing a downside potential of 5.6% relative to the closing price of $234.40.

5.Technical Analysis Charts

TESLA

AMAZON

APPLE

In summary, James believe all three of these stocks are long-term beneficiaries of AI.

In conclusion, the main investment thesis for $Apple(AAPL)$ is centered around the iPhone upgrade cycle. As for $Tesla Motors(TSLA)$ , we will see 2024 as a transition year, with most growth expected to materialize in 2025. However, if Elon Musk continues to make ambitious promises on Twitter or during earnings calls, Tesla's stock price is likely to rise this year.

Regarding $Amazon.com(AMZN)$ , the benefits from cost optimization are tapering off. However, the growth in generative AI might arrive just in time to boost profit margins.

All of the Magnificent Seven stocks appear quite expensive at the moment. For instance, Apple has a P/E ratio of 33.8x, Amazon is at 32.6x, and Tesla is at 94.5x. However, investors are willing to apply higher P/E ratios for AI-related stocks.

Currently, AI is poised to kickstart a new earnings growth cycle for these stocks, akin to Nvidia's experience over the past year. So, unless earnings significantly miss expectations for two to three consecutive quarters, James may start to doubt my optimism about AI. Until then, He believes the valuations of these AI stocks are justified.