Amazon Stock NASDAQ:AMZN Strong AI, Cloud Computing And Ecommerce Recommended By Analyst To Growth

Amazon Stock, the Seattle-based multinational tech company, has seen a considerable adjustment to its price target from investment firm Jefferies , which has elevated the estimate from $135 to $150. This adjustment is fueled by the firm's belief that Amazon's escalating AI capabilities, combined with the anticipated recovery of Amazon Web Services (AWS) and an upswing in profitability, will positively affect the company's market position.

What Analyst Say About Amazon Stock ?

Analysts at Jefferies led by Brent Thill predicted an 8% increase in Amazon's full-year 2024 EBITDA, a crucial financial indicator that signifies a company's health, surpassing the general consensus. Furthermore, the team attributes the 50% surge in Amazon's share price year-to-date to improving profitability and anticipated AWS recovery, along with the benefits of AI tailwinds. Although Amazon is currently trailing its mega-cap peers in terms of generative AI capabilities, Jefferies anticipates the tech giant will make up for lost ground in due time, leveraging its longstanding history of innovation.

On the other hand, John Colantuoni, an analyst at Jefferies, also backed Amazon, referring to it as a "core beneficiary" of the rising AI era, mainly due to the presence of AWS, its cloud computing unit. Although Amazon has yet to match its peers' AI capabilities, the company's tradition of innovation is expected to play a key role in overcoming this hurdle.

Operating margins for Amazon are projected to jump to 3.9% in 2023 from 2.4%, signifying the company's ongoing enhancement of profitability. Additionally, AWS is projected to experience renewed growth in the fourth quarter as customer budget constraints and cloud optimization challenges diminish.

As for Amazon's ecommerce segment, the company is slated to host its annual Prime Day event on July 11-12. The sale will feature a variety of deals on products from prominent brands like Lancôme, Kérastase, Peloton Interactive, Victoria’s Secret, and Sony, among others. Amazon's exclusive deals will also be featured, with offerings from D’Amelio Footwear, OPI, and Alo Yoga. The retail extravaganza will span multiple countries, providing a substantial boost to Amazon's sales.

Moreover, Amazon's Kuiper, an initiative to offer quality broadband internet connectivity via a low earth orbit satellite system, is set to cater to an expansive addressable market of hundreds of millions of entities, including households, businesses, and governments. Given the low production cost of the lightweight terminal needed to access the service, Kuiper has the potential to drive the next phase of growth for Amazon.

One of Amazon's standout offerings is its Prime membership, which not only provides customers with a range of services including free and expedited delivery, but also a vast array of entertainment options through the Prime Video streaming service. Currently boasting more than 200 million members globally, the Prime program significantly enhances Amazon's revenue stream and promotes customer loyalty.

Despite the recent slowing in Amazon's revenue growth and a 33% dip from its all-time high in July 2021 due to ongoing macroeconomic headwinds, Amazon remains an attractive investment. In 2022, AWS alone generated $80 billion in revenue, marking a 29% year-over-year increase. With a 38% share of the U.S. e-commerce market and a leading 32% share of the global market for cloud services, Amazon's commanding presence in multiple fast-growing industries underscores its growth potential.

Currently trading at a price-to-sales (P/S) multiple of 2.5, which is historically lower than its five-year average P/S of 3.6, Amazon presents a lucrative opportunity for investors. With analyst estimates projecting an 11% compound annual growth rate for Amazon's revenue over the next five years and earnings per share flipping from a $0.27 loss in 2022 to a positive $6.16 in 2027, the tech giant is well-positioned for a robust financial performance, potentially driving its stock price to new heights.