Reevaluating Amazon’s Stock Price Targets Before Earnings: Analysts Take Another Look

On July 16, 2002, Jeff Bezos, the founder and then-CEO of Amazon (AMZN), announced that the company was rolling out the red carpet for developers.

The internet giant was introducing Amazon Web Services, touted as “a platform tailored for crafting innovative web solutions and services expressly for developers and website owners.”

“Developers can now seamlessly integrate content and features directly onto their own websites,” Bezos stated. “We’re eager to see the creative ways they’ll surprise us.”

Over two decades later, it’s safe to say that the company is pleasantly astonished by the astounding growth of AWS.

During Amazon’s fourth-quarter earnings call on Feb. 1, Andy Jassy, Amazon’s current CEO, informed analysts that AWS revenue had surged by 13% year-over-year in the quarter, compared to 12% in the previous quarter, “approaching an annualized revenue run rate of $100 billion.”

“We closely monitored the incremental revenue added each quarter,” Jassy remarked. “In Q4, AWS contributed over $1.1 billion of incremental quarter-over-quarter revenue, surpassing any other cloud provider based on our assessment.”

Jassy also highlighted 2023 as a significant year for the delivery and customer trial of generative artificial intelligence (Gen AI) in AWS.

JP Morgan analyst Doug Anmuth discussed AWS in a report on the internet sector.

Anmuth expressed overall positivity regarding the sector leading up to the first-quarter earnings reports.

He noted that investor sentiment was generally favorable, with certain areas exhibiting higher valuations and heightened expectations.

Amazon remains the top pick for 2024 according to the firm, “despite being the most heavily owned across our coverage.”

“We believe Amazon’s dominance in e-commerce and public cloud positions it well,” the firm stated.

Anmuth anticipated strong performance from Amazon Web Services in the first quarter and throughout the year.

“We see Amazon’s flexibility in managing inventory and Prime membership as key advantages in its Stores business, while its early lead in the cloud has resulted in approximately 35% AWS global market share,” he explained.

Additionally, Anmuth predicted robust growth in stores, improved operating profit margins, enhanced international profitability, and disciplined cost management, all contributing to a multiyear increase in free cash flow.

Anmuth anticipated ongoing support for AWS through 2024 from easing optimizations, new workload deployment, favorable comparisons, and early monetization of generative AI.

The analyst forecasted a 6.1% operating profit margin for North America in 2024, with potential upside through regionalization, inventory placement, inbound shipping optimization, and advertising.

Amazon is set to announce first-quarter earnings on April 25. Analysts surveyed by FactSet projected earnings of 83 cents per share on $142.6 billion in revenue.

Roth MKM analyst Rohit Kulkarni reiterated a buy rating and $205 price target on Amazon, noting potential supply chain efficiencies based on discussions with an e-commerce veteran.

Stifel analyst Mark Kelley raised the firm’s price target on Amazon to $224 from $200, expecting shares to trend toward the higher end of the valuation range over the last two years.

“Sentiment within our group has been mixed since the beginning of 2024, although positioning has shifted somewhat, with positive sentiment mostly focused on large and mega caps,” Kelley observed.

The firm’s outlook for the first quarter remains largely unchanged, with improvements in the advertising environment, resilient e-commerce, and mixed performance among subscription-based companies.

“The wildcard this quarter could be subdued qualitative commentary as the situation in the Middle East deteriorates (possibly leading to pauses in brand spending),” Kelley speculated.

Lucas Falcão

International Politics and Sports Specialist, Chief Editor of Walerts with extensive experience in breaking news.

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