Analysts revamp Amazon stock-price targets after earnings

Amazon  (AMZN) – Get Free Report has a storied history from its humble origins as a book/music/video seller 25 years ago to its current status as a retail/technology colossus.

The company founded by Jeff Bezos has an iron-clad position in e-commerce and cloud services. Recall that the cloud refers to offsite storage of data and documents.

“It has emerged as the clear e-commerce leader given its size and scale, which yield an unmatched selection of low-priced goods for consumers,” wrote Morningstar analyst Dan Romanoff.

“Prime ties Amazon’s e-commerce efforts together and provides a steady stream of high-margin recurring revenue from customers who purchase more frequently from Amazon’s properties.”

And then there’s the cloud. “Through Amazon Web Services (AWS) Amazon is a clear leader in public cloud services,” Romanoff said. “Additionally, the firm’s advertising business is already large and continues to scale as ads have made their way into Amazon’s streaming outlets.”

Amazon released its fourth-quarter earnings Thursday, and that led analysts to shift their outlooks for the company, including new price targets.

Jeff Bezos, founder of Amazon, is one of the most successful entrepreneurs of our generation.

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What the Profit Report Means

The earnings numbers beat Wall Street forecasts. Amazon reported that revenue jumped 14% to $170 billion in the fourth quarter from $149.2 billion a year earlier.

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Net income rocketed to $10.6 billion, or $1 a share, from $278 million, or 3 cents a share. Strong holiday sales helped boost the numbers.

AWS revenue grew 13%. While that figure didn’t blow analysts’ socks off after stratospheric gains in past years, it did beat the 12% gains of the prior two quarters. And AWS operating profit climbed 38%.

A 27% revenue increase for Amazon’s advertising segment impressed analysts. “Amazon’s advertising growth continues to outpace that of its large Internet peers, albeit off of a smaller revenue base,” Romanoff said.

Meanwhile, “improvements in fulfillment and cost to serve continue to drive stronger-than-anticipated profitability in retail,” he said.

Amazon offered good news on costs too. Operating expenses climbed 7% in the fourth quarter from a year ago, which is half the growth rate of revenue.

Looking forward, Amazon forecast revenue expansion of 8% to 13% this quarter from a year earlier. It also sees operating income increasing 67% to 150%.

Amazon analysts move their price targets

The earnings report led a slew of stock analysts to lift their target price for Amazon. “After several quarters of strong performance on the profitability front, we are raising our operating margin outlook by 160 basis points for 2024 and over the next several years,” Romanoff said.

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That led him to boost his fair value estimate for Amazon’s stock to $185 from $155. It traded at $172.10 Friday.

Wedbush analysts Scott Devitt lifted his price target to $220 from $210.

His reasoning was similar to Romanoff’s. “The magnitude of operating profit growth in the fourth quarter further validates the strength of Amazon’s underlying margin trajectory,” Devitt wrote in a report. “We see a clear path ahead to about a 10% operating margin in 2025.”

In terms of e-commerce, “Amazon achieved its fastest delivery speeds ever in 2023 while managing to reduce the cost to serve domestically by 45 cents per unit during the fourth quarter,” Devitt said.

“The shift to a regional fulfillment network and ongoing improvements in delivery speeds globally are unlocking incremental purchases from Prime members, and Amazon observed strong growth in everyday essential categories.”

Among other analyst price-target changes,

Morgan Stanley went to $200 from $185,Bank of America went to $204 from $185,Deutsche Bank went to $200 from $175,Benchmark went to $200 from $175,Stifel went to $200 from $175 and,Needham went to $205 from $175.

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The author owns shares of Amazon.

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