Top 2 Stocks Recommended by Warren Buffett to Purchase at the Moment

Warren Buffett, an American entrepreneur and benefactor, is esteemed by many as the planet’s most thriving financier. Berkshire Hathaway (BRK.B), Buffett’s holding company, has concentrated its investment approach on locating businesses with robust fundamentals and holding them indefinitely.

In 1988, Buffett conveyed in a letter to shareholders, “When we possess portions of exceptional businesses with remarkable managements, our preferred holding period is forever.” Two such businesses are Amazon (AMZN) and Apple (AAPL). Even though Amazon constitutes 0.5% of Berkshire’s holdings, Apple makes up 46.4%.

Both companies boast strong customer loyalty and are economically well-placed. While Apple’s consumer products are highly favored over others in the market, Amazon dominates e-commerce and cloud computing. Amazon’s shares have surged an extraordinary 834% in the last 10 years, while Apple’s shares have increased an eye-catching 907%. 

Every One of Amazon’s Ventures Are Booming

Amazon has moved a great distance from being just another internet-based shopping destination to the e-commerce-slash-tech giant it is today. Its varied range of services includes online retail, entertainment, and cloud computing. Valued at $1.7 trillion, Amazon’s shares are up 13% year-to-date, in contrast to the S&P 500 Index’s ($SPX) gain of 4.5%.

Top 2 Stocks Recommended by Warren Buffett to Purchase at the Moment

The company not only dominates the e-commerce space, but its cloud division, Amazon Web Services (AWS), now possesses the biggest market share in global cloud computing. According to Statista, AWS makes up 32% of the cloud market, with Microsoft’s (MSFT) Azure and Alphabet’s (GOOGL) Google Cloud in the second and third positions, respectively.

AWS continues to be the main element driving growth. In its recent fourth quarter, AWS yielded $24.2 billion in sales, a growth of 13% year-over-year. Amazon’s strategic partnership with AI start-up Anthropic could extend AWS’s capabilities. 

Moreover, total net sales reached $170 billion, rising 14% from the previous year’s quarter. Net income for the year reached $2.90 per share, compared to a net loss of $0.27 per share.

Promotion is another growth stimulant for Amazon. The corporation’s resolution last year to integrate restricted advertisements on Prime Video will support the escalation of advertising revenue in the coming quarters. For 2023, revenue from advertising increased to $46.9 million from $37.7 million in the previous year. 

Amazon’s free cash flow ended at $36.8 billion for the trailing twelve months, which should enable the firm to fund artificial intelligence (AI)projects and acquisitions, if any, in the near future.

Analysts forecast Amazon’s revenue will leap by 11.5% year-over-year to $641.2 billion in 2024. Earnings are anticipated to surge by a whopping 42% to $4.11 in 2024.

Trading at 41 times 2024 earnings, Amazon appears pricey. Nevertheless, it may be worthwhile to pay the premium, if you trust that the company’s extended growth prospects in e-commerce and cloud computing will be exceptional as AI advances. 

Wall Street rates AMZN a “strong buy” overall. Out of the 45 analysts covering AMZN, 41 rate it a “strong buy,” three analysts recommend a “moderate buy,” and one says it is a “hold.” The average price target stands at $194.88, which implies about 14.4% potential upside from current levels. Its high target price of $230, however, indicates the stock can soar as high as 35% by the end of 2024.

Apple Will Likely Maintain Its Market-Dominating Status

Apple, valued at $2.8 trillion, is one of the globe’s highly popular and preferred technology corporations. Its products have a vast following and unwavering loyalty that appear unbeatable. The majority of iPhone users continue to upgrade their devices while gravitating toward other Apple products. 

AAPL stock has slipped about 2% YTD, in comparison to the Nasdaq Composite’s ($NASX) gain of over 4%.

The launching of Vision Pro, a spatial computer, last week in the U.S. seems to have attracted customers. During the Q1 fiscal 2024 earnings call, CEO Tim Cook described it as a “revolutionary device built on decades of Apple innovation, and it’s years ahead of anything else.” The base model costs $3499, which is quite expensive. We’ll have to wait and see how it drives revenue for the company in the coming quarters.

In the first quarter ended Dec. 30, Apple’s revenue jumped just 2% year-over-year to $119.6 billion, while earnings surged 16% to $2.18 per share. Apple’s installed base of active devices has now crossed 2.2 billion globally. iPhone revenue jumped 6% to $69.7 billion. Management discussed that a study by Kantar showed that iPhones were “4 out of the top 5 models in the U.S. and Japan.”

Apple aims to further integrate AI and invest in new products. At the end of the quarter, it had $173 billion in cash and marketable securities, with a total debt of $108 billion. The company had a free cash flow balance of $37.5 billion and returned $27 billion to shareholders during the quarter. Apple also declared a quarterly cash dividend of $0.24 per share, due in February.

Analysts predict Apple’s revenue and earnings to grow by 1.3% and 6.9%,respectively, in fiscal 2024. Currently, the stock trades at 28 times forward earnings, compared to its five-year price-to-earnings average of 24x. 

Considering Apple’s expected growth, its valuation appears steep. Nevertheless, it still has significant room to grow and expand its business with the assistance of AI. With its solid reputation, customer loyalty, and high-quality products, Apple has the potential to generate substantial long-term returns.

Referring to Wall Street, analysts rate AAPL stock a “moderate buy.” Out of the 28 analysts covering the stock, 16 rate it a “strong buy,” three rate it a “moderate buy,” eight recommend a “hold,” and one rates it a “strong sell.” The average analyst target price of $206.54 implies an upside potential of 9.2% from current levels. Moreover, AAPL’s high target price of $250 implies an upside of 32% over the next 12 months. 

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On the date of publication, Sushree Mohanty did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.

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