Amazon Stock (NASDAQ:AMZN)
The opinion of Wall Street analysts regarding Amazon’s retail and cloud businesses has been improving recently, which has been positive for the company’s stock price. On Thursday, there was a flurry of bullish notes, which added fuel to the fire.
Amazon stock (NASDAQ:AMZN) has increased by 29% over the past two months and by more than 50% for the year to date, handily outpacing the returns of the other tech giants such as Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT), and Alphabet (NASDAQ:GOOGL), despite the fact that the stock is still significantly lower than it was around the end of 2021 when it reached its all-time high.
An analyst from Wells Fargo named Amazon his top pick after he initiated coverage on 13 large-cap internet stocks on Thursday morning. Amazon was one of only two stocks, along with Uber (UBER), that he initiated coverage on with an Overweight rating. This revelation was an eye-opener for investors.
He gave the companies Alphabet, Meta (NASDAQ:META), Pinterest (NYSE:PINS), Snap (NYSE:SNAP), DoorDash (NYSE:DASH), eBay (NASDAQ:EBAY), and Lyft (NASDAQ:LYFT) ratings of Equal Weight. At a time when he was underweight, he founded Etsy (NASDAQ:ETSY), Airbnb (NASDAQ:ABNB), Booking (NASDAQ:BKNG), and Expedia (NASDAQ:EXPE). His broader concerns include the dangers that are associated with the rapid adoption of AI as well as the aggressive competition that is present in the online travel market.
Due to excessive growth during the Covid era in its logistics division, Amazon’s core retail business has been experiencing difficulties in recent quarters. However, the company has been working hard to reduce its expenses. Gawrelski, who has a target price of $159 on the stock, believes that the company’s North American retail business margins are on the mend, and they are doing so faster than the view that is held by the majority of people on Wall Street.
He believes that the company will get back to the margins it had before the Covid (2019) crisis by the year 2025, which is a year earlier than the consensus. In his observations Recently, the company’s Chief Executive Officer, Andy Jassy, mentioned that the business is experiencing positive early results as a direct result of shifting its strategy from national fulfillment to regional fulfillment. The growth of Amazon Web Services, the company’s cloud business, has been slowing down recently due to the fact that many customers are looking for ways to reduce their expenditures in the cloud. Gawrelski, however, believes that Amazon Web Services growth will “inflect positively in August,” which will coincide with the beginning of the optimization trend a year ago.
Gawrelski notes that his model forecasts pretax earnings that are 19% higher than the consensus on Wall Street for the year 2024 and that are 10% higher than the consensus for the year 2025.
In the meantime, an analyst at UBS named Lloyd Walmsley reaffirmed his Buy rating on Amazon shares while simultaneously increasing his target price on the stock from $130 to $150. His call is centered on his opinion that Amazon Web Services growth rate will rebound as a result of an increase in demand for Bedrock, which is the company’s service for building models for applications that use generative artificial intelligence.
Walmsley notes that his projections for Amazon Web Services (AWS) growth for the next two quarters are a little lower than what is expected by Wall Street, but he raises his expectations for 2024 and 2025. Even though AWS is falling further and further behind on large language models, the analyst believes that the company will quickly make up for lost ground. According to him, Amazon “will benefit from incumbency status because enterprises are already trained on AWS and store data” with the company. He bases this opinion on the fact that Amazon is already the incumbent.
Analyst Justin Post from BofA Global Research offered his thoughts on Thursday regarding a report from The Wall Street Journal that stated the company is mulling over the possibility of introducing a paid tier to its Amazon Prime Video service. Post, who has a Buy rating and a price target of $139 on the stock and writes that the idea makes sense, maintains his rating.
The post mentions that Prime Video already inserts advertisements into some of its live sports programming, such as Thursday Night Football. Additionally, the company provides a streaming service known as Freevee that is supported by advertisements. In addition to this, he makes reference to a comment made in the Journal, which states that there has been demand from advertisers for streaming platforms that can attract younger viewers. In the most recent presentation that Netflix gave for its Advertising Upfront, he says that the company revealed that the majority of its ad-supported users are between the ages of 18 and 49, with the median age being 34 years old.
“In our view, Amazon’s user data, existing relationships with retail advertisers, and extensive ad sales teams provide a competitive advantage for monetizing ad-streaming,” writes Post.
As my colleague Andrew Bary points out, on Wednesday, Bernstein analyst Mark Shmulik suggested that the performance of the stock could improve if the company sold off some of its non-core businesses, such as its healthcare arm and its Project Kuiper satellite internet service. While reiterating his Outperform rating and $140 price target, Shmulik also suggested that the stock’s performance could improve if the company sold off some of its non-core businesses.
On Thursday, Amazon stock price was $124.79, up 2.9% from the previous day.
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