Is Amazon Web Services a $3trn opportunity?

In today’s top stories, Amazon Web Services could grow to triple the value of the whole company, BYD’s EV sales soar and Airbus signs a $37bn deal with Chinese airlines. Meanwhile, Tesla’s Q2 deliveries fall and analysts see Levi’s and Kroger as potential winners in H2.

AWS could be $3trn opportunity

Amazon’s [AMZN] cloud division could grow to $3trn, more than triple the value of the entire company, says Redburn analyst Alex Haissl. Though the tech giant has no plans to spin off Amazon Web Services (AWS), Haissl argues that “if the performance gaps versus the non-AWS parts continue to widen, it could be on the table further down the road”. His target of $270 implies an upside of 146% from the 1 July closing price of $109.56. In the first quarter of 2022 AWS revenue grew 37% to $18.4bn, while the company’s ecommerce arm saw sales decline. 

Tesla deliveries reverse

The slowdown in China impacted Tesla’s [TSLA] global deliveries in the second quarter. Although up 27% year-over-year to 254,695 for the months April to June, it was a significant fall from the 310,048 vehicles delivered between January and March. Performance should improve in the third quarter given China’s reopening and production restarting at its Shanghai factory. However, Elon Musk has a “super bad feeling” about the global economy in general and has already started laying off staff in its Autopilot team..

Chinese airlines favour Airbus over Boeing

Three major Chinese airlines have ordered 292 Airbus [AIR.EPA] jets between them in a $37bn deal seen as a blow to rival Boeing [BA] as the two companies fight for dominance in the Chinese market. A spokesperson for the US aerospace firm stated that it was “disappointing that geopolitical differences continue to constrain” exports. John Strickland, an aviation analyst at JLS Consulting, told Bloomberg that Netherlands-based manufacturer “Airbus has long had a stronghold in China”, which the deal will help strengthen.

Rapid rise in BYD’s EV sales

Warren Buffet-backed BYD [1211.HK] continues to report a rapid rise in electric vehicle sales. Over the weekend the company announced it had shifted 134,036 new energy vehicles last month, up from 41,036 in June last year. It took total sales for the first half to 641,350, up 315% year-over-year. Chairman Wang Chuanfu told investors at its AGM on 8 June that the shift to electric is “accelerating, much faster than we imagined”. The company’s Hong Kong-listed shares have gained 12.2% in the past month.

H2 picks with major upside

With June now over, investors are looking for ideas for the rest of the year. Denim jeans maker Levi’s [LEVI] has been chosen as a second half pick by Bank of America’s Christopher Nardone. Levi’s “has multiple growth engines to navigate this [current] challenging consumer backdrop,” he wrote in a research note seen by CNBC. Scotiabank’s Patricia Baker has named grocery chain Kroger [KR] as another one for the watchlist as the company is well positioned to weather inflation and has posted strong results this year. 

Shell shakes off windfall tax worries

The Shell [SHEL.L] share price has shaken off any immediate worries about Rishi Sunak’s windfall tax, recording a 52-week high of 2,459.24p on 9 June. The North Sea oil giant could report bumper profits for the second quarter, which could result in a double-digit percentage dividend increase, according to analysts at Jefferies. Challenges remain, though, as it comes under pressure from activist investors who want it to get serious about green energy. 

Water stocks sink lower

Water stocks can generally be thought of as recession and inflation-proof. For example, Severn Trent’s [SVT.L] dividend increases in line with inflation. However, both Severn Trent and Pennon [PNN.L] recorded 52-week lows on Monday despite showing resilience in recent months. The United Utilities [UU.L] share price has also sunk lower but is currently around 6% above its 52-week low set last October.