Amazon, Microsoft and Home Depot 'Unfairly Punished,' Analysts Say

Amazon, Microsoft and Home Depot are being "unfairly punished" in the broad-market rout, Jefferies analysts say.
Publish date:

Amazon  (AMZN) - Get Report, Microsoft  (MSFT) - Get Report and Home Depot  (HD) - Get Report are among several stocks that Jefferies analysts say are being "unfairly punished in an unnaturally punitive tape" as markets are battered by such factors as the spreading coronavirus and the oil-price war. 

The stocks have become "much more compelling" investments, the analysts say.

Analyst Brent Thill said Amazon could benefit from the coronavirus outbreak as consumers stock up on essential items and order online to avoid crowded locations. 

He also noted the benefit of price increases in commodity products more than offsetting any near-term inventory challenges from idle factories in China. 

Thill said advertising could be an issue near term as businesses look to cut spending. 

Volume headwinds could start if the coronavirus continues to disrupt supply chains into the summer, Thill said. But Amazon's strong balance sheet and diversified business could help reduce risk if a long-term slowdown occurs, he said.

The Seattle online-retailing and tech giant at last check were 2.4% to $1,844.

Microsoft, Thill said, has been pressured by macroeconomic concerns and revised guidance for its More Personal Computing segment, due to lowered Microsoft Surface and Windows original-equipment-manufacturer expectations related to the coronavirus. 

But he considers this temporary and not indicative of the demand for Microsoft products. 

Thill said he still saw the Redmond, Wash., software major as a large, diversified business with excellent visibility and a clear line of sight into double-digit revenue growth for the foreseeable future. 

Microsoft shares at last check were up 2.8% to $154.77.

Regarding Home Depot, analyst Jonathan Matuszewski said the selloff offers an "attractive buying opportunity" for the Atlanta home-improvement retailer. 

The coronavirus, oil deflation and recent volatility may hurt consumer confidence near term, but Matuszewski says the backdrop for home improvement is supportive over the medium term.

He also sees the backdrop supported by lower interest rates, rising residential construction outside city centers, and robust remodeling spending with baby boomers increasingly aging in place. 

Home Depot shares were up 2.8% to $216.28.

Join Jim Cramer's special Action Alerts PLUS members-only call to prepare your investment strategy during the economic fallout from the coronavirus and as oil prices fall amid a price war.