Strategist says this tech giant is the ‘cheapest of all the mega-cap names’ right now
Tech giant Alphabet is “the cheapest” of all the mega-cap names, according to Matt Orton, chief market strategist at Raymond James Investment Management. With the U.S. consumer “holding up well,” its ad-driven revenues are “incredibly strong,” he told CNBC’s ” Street Signs Asia ” on Monday. “And so I think with the more benign economic backdrop that’s supportive of a strong, more robust advertising environment, and then throw in the fact that Google Cloud has been gaining market share as well, it translates to a very compelling, long term durable earnings growth story,” Orton said. “That’s probably the cheapest by far — the cheapest of all the mega-cap names, and so I think there’s a lot of durability to Alphabet,” he concluded. Orton said what’s “most exciting” about Alphabet is the long-term artificial intelligence opportunity, adding that the tech giant is underappreciated in that regard. “When I look at Alphabet, it’s not given enough credit for its AI capabilities,” he said, adding that can be blamed on its “fumbled PR rollout.” “But its AI has been invested in tens and tens of billions of dollars over the longer term. And I think from the feedback I’ve received is a better product than anything that’s on the market.” Alphabet versus Microsoft Alphabet and Microsoft will be the two long-term winners in AI, according to Orton. He said Microsoft is particularly exciting because of its strong dominance in the cloud space, noting that its Azure business has “by far the largest market share” after AWS. Much of its AI technology will be rolled out in Office360, which has the potential to be “another really important driver of revenues,” said Orton. But he has one concern about Microsoft in the short term: valuations that will be pressured by interest rates. “Rates are going to put pressure on valuation, and can Microsoft keep the momentum of the degree of earnings beats that it had. But if there were any weakness in this market or Microsoft in particular, I think that would be a really good opportunity to use it opportunistically to continue to build a position,” Orton said. “Because when you look at AI, there’s going to be two big long-term winners. It’s Microsoft, it’s Alphabet. And those are the two names that you’re going to want to own,” he said, adding that though he wouldn’t be “chasing it higher,” he would definitely want to own it if he didn’t already.
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