Some of the biggest news in tech last week came from analyst notes on high-flying tech stocks. Even though all three of these stocks saw big gains over the past 12 months, three analysts think there are more gains to be had.
- One analyst sees Microsoft (NASDAQ: MSFT) getting a bigger-than-usual dividend increase.
- Square (NYSE: SQ) gets pegged as the best stock pick in fintech.
- Amazon.com (NASDAQ: AMZN) stock receives a massive $2,500 price target.
Here's a look at each of these stories.
Microsoft: Expect a big dividend increase
Going by its usual timeline for dividend increase announcements, software giant Microsoft is expected to announce a dividend increase sometime in September. The company has announced a dividend increase every year since 2010, and Microsoft's strong recent earnings growth makes another dividend increase this year virtually certain.
But Morgan Stanley analyst Keith Weiss expects Microsoft's dividend increase this year to easily trump the company's single-digit increases in each of the past two years. Citing recent changes to tax law that allowed companies to repatriate overseas cash at a lower tax rate, as well as Microsoft's strong earnings growth, Weiss says there's a good chance Microsoft could increase its dividend by more than 20%.
Weiss has a $130 12-month price target on Microsoft.
Square stock: Headed to $100?
Square, a company that began as a mobile-payments company but has expanded into a robust financial-technology platform offering a wide range of services for businesses and consumers, has been on a tear recently. Before a bullish analyst note on Square last week, shares were already up more than 130% year to date.
But Guggenheim analyst Jeff Cantwell believes there's significant upside ahead for Square. Last week, as CNBC reported, Cantwell raised its 12-month price target on Square from $75 to $100, calling the stock his "highest-conviction name" in fintech. To support his bull case, Cantwell forecast 2019 revenue growth for Square to be well beyond what the current consensus analyst estimate calls for.
Square stock surged about 10% in the days after Guggenheim's report, leaving shares up 156% year to date.
Amazon.com: The next trillion-dollar company?
Probably the most audacious analyst commentary last week came from Morgan Stanley analyst Brian Nowak, by way of Barron's. Revising his 12-month price target on Amazon stock from $1,850 to $2,500, Nowak now has a higher price target on the e-commerce and cloud-computing giant than any other analyst.
Notably, if Amazon stock does rise this much, the company's market capitalization would have to surge past $1 trillion.
"We have increasing confidence that Amazon's rapidly growing, increasingly large, high-margin revenue streams (advertising, AWS, subscriptions) will drive higher profitability and continued upward estimate revisions," Nowak said in a note to clients.
It's true that the company's profitability has been seeing significant momentum. Amazon's second-quarter operating margin was 5.6%, up from 1.7% in the year-ago quarter.
Of course, investors should take analyst commentary with a grain of salt. While analysts do sometimes contribute useful analysis and insight, investors should be sure to come to their own conclusions.
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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Teresa Kersten is an employee of LinkedIn and is a member of The Motley Fool's board of directors. LinkedIn is owned by Microsoft. Daniel Sparks owns shares of Square. The Motley Fool owns shares of and recommends Amazon and Square. The Motley Fool has the following options: short September 2018 $80 calls on Square. The Motley Fool has a disclosure policy.