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Two of the world’s biggest technology companies, Apple (AAPL) and Amazon (AMZN), are the subjects of fresh Wall Street research. We own shares of both, so we’re breaking down the analyst calls to see how well they gibe with our thinking as we approach their earnings releases next week. Morgan Stanley cautious on Apple ahead of earnings Investors may be getting Amazon’s core retail for free, says Jefferies 1. Morgan Stanley cautious on Apple ahead of earnings The news: One of the Club’s favorite analysts covering Apple expects its third-quarter results to come in lower than the Wall Street consensus when the iPhone maker reports July 28. Morgan Stanley’s Katy Huberty projects Apple to earn $1.10 per share on third-quarter sales of $80.6 billion. That compares to Street estimates of $1.16 per share and $82.5 billion in revenue. The firm also revised its price target to $180 per share, down from $185, and warned of “relatively guarded” macro commentary on the earnings call. Despite Huberty’s near-term caution, she’s hardly telling investors to stay away from the stock. In fact, she told clients to look for opportunities to buy Apple on any “pricing dislocations,” or dips to laypeople. Huberty maintains an overweight rating on the stock. “Apple remains a best of breed consumer electronics company able to invest through cycles, and with 60%+ of revenue more staples-like in nature, strong brand loyalty, and continued product/services innovation, we believe it is better insulated relative to peers during a downturn, which has resulted in 18 points of outperformance (vs. our coverage), on average, late in the economic cycle,” Huberty wrote. She’s referencing Morgan Stanley analysis that found Apple shares, historically, have gained 13% on average late in the economic cycle compared with a decline of 5% for the rest of the firm’s IT hardware companies. Those other companies include Dell Technologies (DELL) and Logitech (LOGI). Our take: This report struck us as a little mixed. But as for what to do with the stock, we hold an outlook similar to Morgan Stanley. As we communicated earlier in July during the Club’s “Monthly Meeting,” we are concerned Apple’s third-quarter results could be weak, which is in line with what Huberty is advising clients. Among our reasons for caution is Apple faced multiple Covid-related challenges in China in its third quarter. Those likely weighed on both supply and demand in the country, which is Apple’s second-biggest end market behind the U.S. All in all, Apple has warned it could see a sales hit between $4 to $8 billion in the third quarter because of supply constraints. Apple shares have had a nice little rally over the past month, up around 16% and outperforming the S & P 500’s nearly 8% gain in the same stretch. We continue to believe this is a name to own, not trade. However, for investors looking to add to their positions, we think it’s prudent to wait for weakness to do so, especially considering the stock’s recent strength and the upcoming earnings print. As Jim Cramer said on “Mad Money” earlier this week , “If you’re thinking about buying something that’s about to report, why not wait until you hear what they have to say?” 2. Investors may be getting Amazon’s core retail for free, says Jefferies The news: Jefferies analyst Brent Thill makes the case that Amazon’s current market valuation ascribes pretty much no value to the company’s core e-commerce operations. He explained his reasoning in a larger note, explaining that he sees Amazon shares “returning to outperformance in [second half of 2022] as top-line accelerates and profit improves, supported by a continuation of attractive growth at the highest margin businesses.” The analyst’s commentary on the retail business was particularly interesting. He arrived there using what’s known in finance as a sum-of-the-parts (SOTP) valuation. It basically values all the different parts of a company individually by applying multiples based on peer businesses, then adds them up to see what the entire enterprise could be worth. Amazon’s current market cap is just over $1.2 trillion. When Jefferies does its sum-of-the-parts valuation for Amazon, the firm determined the non-core retail divisions to be worth nearly $1.2 trillion: about $800 billion for Amazon Web Services, $328 billion for its advertising business and $40 billion for subscription services. “Our SOTP implies the current stock price is ascribing virtually zero value to Core-Retail, which is meaningfully below our Base Case estimate of $287B and results in a $29/share free option at AMZN’s current price,” Jefferies wrote. “This suggests the stock is already pricing-in meaningful headwinds from a recession/cost inflation, limiting downside and creating an attractive risk-reward.” Our take: We’ve warmed up to Amazon shares recently, believing the stock has almost seen enough pain. As we said last week discussing impressive Prime Day sales, we are tempted to upgrade our rating on Amazon from a 2 to 1, meaning we’d be buyers at its current levels. Our logic is not necessarily based on a sum-of-the-parts valuation like Jefferies employed. However, we are both looking closely at the retail side of things for Amazon. Stocks are forward-looking assets, and we think we’re approaching the point where the slowdown in retail sales is fully baked into Amazon shares. Amazon management still has work to do to correct some cost and over-expansion issues, and we should get an update next Thursday, July 28, when the company releases second-quarter earnings. But in general, we’re willing to be patient there. It’s not a one or two week process, and our big-picture reasons for owning Amazon — continued growth of cloud computing, benefiting AWS, and further e-commerce adoption — remain intact. (Jim Cramer’s Charitable Trust is long AAPL and AMZN. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. 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