Analyst unveils new Amazon price target as stock tests…

Analyst unveils new Amazon price target as stock tests $2 trillion

Amazon (AMZN) shares moved higher on April 8, taking the online retail and web services giant's market value closer to $2 trillion ahead of its first-quarter earnings report later this month.

Amazon shares have added more than $370 billion in market value so far this year, trailing only social-media giant Meta Platforms (META) and semiconductor stalwart Nvidia (NVDA) among the best-performing Magnificent 7 tech stocks.

The gains have been tied largely to investor bets on its web services, streaming media, advertising sales, and its dominant position as the world's largest online retailer.

The breadth of its business units and the capital spending required to keep it competitive have raised concerns that its profit margins might narrow. However, a renewed focus on cost-cutting is starting to pay off.

Over the past year, Amazon has executed big job cuts, overhauling its logistics, media, home-device technologies, and Twitch videogame-streaming divisions. At the same time, it has ramped up investments in AI technologies, which will further improve cash flow.

Amazon shares are one of the market's best-performing stocks in 2024, adding more than $370 billion in value this year.
The Street/Shutterstock

Amazon's chief financial officer, Brian Olsavsky, told investors earlier this year that "there's a general feeling in most teams that we're trying to hold the line on headcount" after "coming off a period where we've done a lot of hiring."

Amazon's AI investments bearing fruit

Amazon Web Services, the group's cloud-computing division, is also set to benefit from the explosion in AI investments as companies adopt more sophisticated datasets that require enhanced storage and management capabilities.

Amazon launched a business-focused Chatbot, called Q, last year as part of its effort to keep pace with Microsoft's Copilot. Amazon also plans to make a new series of AI chips that will complement those made by Nvidia to boost its servers' speed and processing power.

And with profit and traffic improving in its core retail business as well, Amazon forecasts first-quarter revenue to be as much as $143.5 billion when it reports on April 25.

Heading into that print, Morgan Stanley analyst Brian Nowak reiterated Amazon as the bank's Top Pick on April 8, citing its "multiyear, efficiency-based cash-flow story." The investment bank's analyst raised his price target by $15 to $215 a share.

Nowak sees Amazon's "cost to serve" model, tied to the regional alignment of its fulfillment and transportation supply chains, providing a roadmap to Amazon achieving $100 billion in earnings by 2026.

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Wall Street analysts expect Amazon to post first-quarter earnings of 83 cents a share on revenue of around $142 billion.

AWS revenue will likely rise around 15% from a year earlier to $24.53 billion. Online sales are estimated to be up 6.6% to $54.5 billion. Ad sales, one of Amazon's fastest-growing divisions, are forecast to rise 23% to $11.7 billion.

Amazon shares were 1.07% higher in recent trading at $187.04 each, extending the stock's year-to-date gain to around 25%.

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