Recession fears have resurfaced following a disappointing jobs report, raising concerns about the Federal Reserve’s timing in cutting interest rates. As a result, the Nasdaq Composite has entered correction territory, with a decline of at least 10% from its record high. Among the “Magnificent Seven” stocks, Amazon and Apple have experienced double-digit declines, albeit to varying degrees. While some investors may be tempted to view these pullbacks as buying opportunities, a closer examination reveals differing prospects for each company.
Amazon, a dominant player in e-commerce, advertising, and cloud infrastructure, reported mixed financial results in the second quarter. While revenue fell slightly short of Wall Street expectations, GAAP net income exceeded analysts’ forecasts. The company’s guidance for the third quarter, however, was viewed as somewhat disappointing, contributing to the recent decline in its stock. Nevertheless, Amazon’s strong presence in growing markets, such as e-commerce, digital advertising, and cloud computing, positions it for potential double-digit sales growth in the coming years. With a reasonable valuation and positive earnings growth projections, patient investors may find an opportunity to buy a small position in Amazon.
On the other hand, Apple, known for its consumer electronic devices and services, faces headwinds in several areas. The recently enacted Digital Markets Act could impact the dominance of its App Store in Europe, while the company is losing smartphone market share in China. Despite reporting modest financial results in the June quarter, including record-high active devices and services revenue, Apple’s stock currently trades at a premium valuation. Wall Street’s expectations for earnings per share growth over the next three years, combined with the lack of a clear-cut strategy for monetizing AI features, contribute to concerns about the stock’s rich valuation. Notably, Warren Buffett has reduced Berkshire Hathaway’s stake in Apple in recent quarters, further signaling caution for investors.