Which giant tech stock should you buy in Q3? Apple, Alphabet, or Microsoft?

By: Motiur Rahman
Motiur Rahman
Md Motiur enjoys researching how companies are solving challenges the world will face over the coming decades. In his… read more.
on Jul 28, 2021
  • Three of the biggest US technology stocks smashed analyst expectations in the Q2 results.
  • Alphabet outperformed earnings by 41%, while Apple and Microsoft beat by 28% and 13%, respectively.
  • They all pulled back on Wednesday after advancing in after-hours trading on Tuesday. Which should you buy?

Alphabet Inc. (NASDAQ:GOOG), Apple Inc. (NASDAQ:AAPL), and Microsoft Corporation (NASDAQ:MSFT) all reported Q2 results on Tuesday after markets closed. The three technology giants beat analyst expectations on revenue and earnings, sparking an after-hours surge in the stock prices. However, all three stocks pulled back on Wednesday morning before attempting a recovery in the afternoon session.

Although GOOG, AAPL, and MSFT all look compelling to value investors, one stands out clear going into August.

Should you buy Alphabet, Microsoft, or Apple shares in August 2021?

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Alphabet surprised analyst expectations with $27.26 earnings per share, beating the consensus Street estimate of $19.33. As a result, the stock now trades at a forward P/E ratio of 28.82, making it attractive to value investors. 

Analysts expect GOOG’s EPS to grow by 48.30% this year and at an average annual rate of 21% over the next five years. Therefore, growth investors could also begin to show interest.

Source – TradingView

Technically, Alphabet shares appear to be trading within an ascending channel formation in the intraday chart. Investors can target extended gains at approximately $2,805 and $2,885. The support levels are $2,656 and $2,573.

Microsoft valuation and outlook

Like Alphabet, computing software giant Microsoft delivered better than expected EPS of $2.17 per share, outperforming the average analyst forecast of $1.92. Still, the stock trades at a relatively higher forward P/E ratio of 34.17 compared to Alphabet. 

Analysts also expect earnings to grow slower than the search engine giant’s, at about 13.40% this year and 17.40% annually, for the next five years. So, although Microsoft’s valuation still makes it an attractive opportunity— Alphabet would be a better selection.

Source – TradingView

Technically, the stock appears to have recently surged to overbought conditions in the 14-day RSI, creating an opportunity for a pullback. Investors can target potential pullback profits at about $278.80 or lower at $256.58. The resistance levels are $293.22 and $304.22.

Apple stock price forecast for Q3 2021

Although Apple beat the Q2 analyst estimate of $1.01 EPS with $1.30, the stock still fell 1.63% on Wednesday— more than GOOG and MSFT. 

From a valuation perspective, AAPL shares traded at a forward P/E ratio of 27.36 as of this writing.

Analysts expect earnings to grow by 10% this year before advancing at an average annual rate of 17.93% over the next five years. Therefore, although Apple looks the most attractive from a valuation perspective, its earnings growth is the least exciting.

Source – TradingView

Technically, The stock is no longer trading overbought conditions after Wednesday’s pullback. Therefore, it has created an opportunity for a rebound. Traders can target rebound profits at approximately $150.60 or higher at $158.00. The support levels are $136.72 and $128.51.

Bottom line: Alphabet seems like the best of the lot

In summary, Alphabet’s earnings growth expectations for this year could provide a vital catalyst in Q3. In addition, the bullish momentum still looks solid, meaning there is time to buy going into the tail end of the year.

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