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- Mizuho analyst James Lee recently completed a CIO survey on cloud computing with a leading channel partner and system integrator.
- The sales channel indicators continue to show an incrementally challenging demand environment.
- Besides seeing extended sales cycles and increasing price discounts, the analyst is seeing the ripple effect of SVB, causing cloud platforms to dole out credit to startups.
- At the same time, higher borrowing costs are driving CIOs to reassess their cloud migration plans.
- Lastly, the analyst sees a new pricing optimization trend emerging with enterprise customers shifting away from the reserved capacity to lower unit prices meaningfully.
- The analyst's overall observation is that the velocity of enterprise spending cuts is much faster than that of consumer spending, given the corporation's sophistication and leverage over vendors.
- Lee maintains a Buy rating on Amazon.Com Inc (NASDAQ: AMZN) with a price target of $135.
- He also maintains a Buy on Alphabet Inc (NASDAQ: GOOGL) with a price target of $135.
- The enterprise headwinds could have an extended effect on 2H23. As a result, the recovery rate would likely be slower than the Street expectations.
- The analyst maintained his FY23 revenue growth forecast of 10%, compared to the consensus of 13%.
- For Google Cloud, the analyst lowered the FY23 revenue growth forecast from 24% to 20%, compared to the consensus of 25%.
- The analyst believes macro issues for AWS and Google Cloud are short-term, not structural, as he remains positive on the long-term fundamentals and recent efforts by both companies to reduce costs.
- Price Action: GOOG shares traded lower by 3.03% at $106.14 on the last check Monday.
| Mar 2022 | Deutsche Bank | Initiates Coverage On | Buy | |
| Feb 2022 | Tigress Financial | Maintains | Buy | |
| Feb 2022 | Credit Suisse | Maintains | Outperform |
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