Thursday - Canaccord Genuity has raised its price target on shares of Amazon.com (NASDAQ:AMZN) to $265 from $230 while maintaining a Buy rating on the stock. The adjustment reflects the firm's confidence in the company's growth prospects across multiple sectors, including eCommerce, cloud computing, and advertising.
The analyst from Canaccord Genuity pointed to a combination of factors that are expected to contribute to Amazon's revenue growth over the coming years. The ongoing enhancements to Amazon Prime services are anticipated to increase the company's share in online retail. Concurrently, Amazon Web Services (AWS) is poised to capture a significant portion of enterprise spending on generative AI technologies.
Furthermore, Amazon's advertising business is likely to expand due to the growing adoption of retail media networks, improved tools for advertisers, and the increased presence of advertisements on Prime Video. These factors are collectively seen as driving a multi-year growth trajectory for the tech giant.
Canaccord Genuity also highlighted Amazon's efforts to improve profitability and free cash flow (FCF) through cost reduction measures. The company's initiatives to regionalize its fulfillment network and identify additional efficiencies are expected to result in structurally higher operating income and FCF. These improvements are likely to contribute to Amazon's profitability gains over time.
Despite a rally in Amazon's shares over the past twelve months, the analyst believes that the current valuation, at approximately 14 times the 2025 estimated enterprise value to EBITDA (EV/EBITDA), may not fully account for the growth potential of the company's higher-margin businesses, such as AWS and its advertising segment. This suggests that the market might be undervaluing Amazon's future growth drivers.
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