Earnings season often provides major market catalysts, especially in for mega cap stocks. In November 2023, Gene Munster, Managing Partner at Deepwater Asset Management, was interviewed on The Closing Print show by Joel Elconin. As Munster focuses his analyses on tech stocks, they discussed his insights on several tech-based companies, taking into account recent Q3 reports and guidance issued by each company. This article sums up Gene’s thoughts on several of these market leaders.
Tesla, Inc. (NASDAQ: TSLA)
Munster’s view on Tesla is notably optimistic. He highlighted the company’s improved position due to the slowdown in electrification and autonomy efforts by traditional automakers.
He noted that four of the top six automakers have recently slowed their pace of building EVs, as well as pursuits in autonomous driving. The primary reason given included a lack of demand for those given products, and they can instead increase profitability by focusing on other products. Munster also noted these were easy areas to cut, given the cost of building facilities and R&D required for autonomy. The sentiment shared by investors and analysts, therefore, was that the demand for EVs and autonomy has been slowing, thereby negatively impacting Tesla’s top line.
This strategic shift among competitors, he argued, increases Tesla’s market share prospects and enhances its competitive advantage in the EV and autonomy sectors.
Apple Inc. (NASDAQ: AAPL)
Munster provided a nuanced analysis of Apple’s recent Q4 guidance, suggesting it was initially misinterpreted by the market. He clarified that Apple’s business, when adjusted for a shorter fiscal quarter (13 weeks instead of last year’s 14 weeks), would actually show a 7% growth year-over-year, contrary to the flat growth initially perceived. For reference, initial analyst expectations were 5%. This insight reflects a more positive outlook for Apple than the market’s initial reaction suggested. Munster also added that Apple could be integral to an AI-play, as demonstrated by OpenAI’s Dev Day, where their software demonstration used an Apple laptop.
Amazon.com, Inc. (NASDAQ: AMZN)
Munster’s commentary on Amazon focused on the significant role of Amazon Web Services (AWS). During the company’s last earnings call, its CEO noted they saw more AWS bookings during the last couple weeks of September than the first 7 weeks of Q3. Additionally, those bookings will be recognized in Q4, pointing to an increased growth rate in AWS during Q4. Munster noted that AWS’s performance and updated future growth projections had a major impact on Amazon’s stock, emphasizing the importance of cloud services to Amazon’s overall business.
Meta Platforms, Inc. (NASDAQ: META)
Munster remains bullish on Meta, specifically highlighting the company’s new AI-powered tools and their potential impact on user engagement. This case is strengthened by their Q3 2023 report stating their revenue is increasing over 20% year-over-year. He underscored the vast reach of Meta’s platforms, with over 60% of the world visiting a Meta property on a monthly basis. Anticipating the impact that new technological advancements would have, Munster puts forth that user engagement and revenue opportunities will be further enhanced.
Zeroing in on WhatsApp, the property currently generates revenue through some enterprise messaging platforms, although broader monetization strategies remain unclear.
Alphabet Inc. (NASDAQ: GOOG, GOOGL)
Munster’s perspective on Alphabet was positive, especially with respect to its AI capabilities and the potential of its Gemini platform (a ChatGPT competitor). He believes Alphabet’s current stock value doesn’t fully reflect its future potential in AI, search, cloud services and YouTube. He believes the primary concern for why Alphabet’s current stock price(s) don’t fully reflect its potential is the threat of AI on the Google search business.
Rivian Automotive (NASDAQ: RIVN)
Regarding Rivian, Munster believes it has the potential to be one of the survivors in the competitive EV market. His commentary indicated a long-term positive outlook for Rivian, despite acknowledging the significant cash burn and challenges the company faces.
Livent Corporation (NYSE: LTHM)
While Munster did not comment directly on Livent’s stock, he expressed a strong belief in the electrification theme, hinting at the broader potential within this sector. His comments suggest an optimistic view of the future of electrification and its impact on related industries and companies, including those involved in manufacturing and recycling batteries.
Munster’s insights reveal a forward-looking approach, focusing on technological advancements, particularly in AI and electrification, and how they might influence the future performance of these companies.