Scotiabank Launches Major Tech Coverage: Amazon and Google Excel, Meta Rated Neutral

Scotiabank has recently started covering three major technology companies: Google, Amazon, and Meta Platforms. The bank has assigned “Sector Outperform” (Buy) ratings to Google and Amazon, while giving Meta a “Sector Perform” (Neutral) rating.

In a note from Friday, analysts pointed out significant differences in the growth paths and competitive positions of these companies, which helped inform their ratings. One key distinction lies in the predictability of consumer usage in the future.

Scotiabank expressed a strong confidence that consumer engagement with Amazon and Google will continue to grow. In contrast, Meta’s future usage is deemed less certain.

The bank emphasized that the number of hours in a day is the “ultimate limited resource.” While Amazon and Google contribute to saving consumers time, Meta’s business model focuses on maintaining user engagement for extended periods. Scotiabank highlighted that Amazon and Google generate revenue by quickly directing users off their platforms—Google through paid search ads and Amazon via product sales—while Meta profits from prolonged user interaction, akin to traditional media models.

Scotiabank is also optimistic about the potential for growth in artificial intelligence (AI) within these companies. They expect Amazon and Google to leverage their cloud services significantly to monetize corporate AI applications. Conversely, Meta’s AI initiatives are viewed as primarily aimed at enhancing ad targeting and user engagement, described as more “incremental rather than revolutionary.”

In summary, while Scotiabank sees promising opportunities for Amazon and Google in AI-driven growth, they are more cautious regarding Meta’s long-term competitive position in the rapidly changing technology sector.