On Friday, Baird maintained its positive stance on Amazon.com, Inc. (NASDAQ:AMZN), raising the e-commerce giant's price target to $260 from the previous $220, while keeping an Outperform rating on the stock. The $2.41 trillion market cap company is trading near its 52-week high of $231.20, with InvestingPro analysis suggesting the stock is slightly overvalued at current levels. The adjustment follows a review of the company's fourth-quarter performance and future prospects, particularly in relation to its e-commerce and advertising segments, as well as its cloud services arm, Amazon Web Services (AWS).
The firm's analyst cited solid fourth-quarter checks and improved visibility for strong AWS growth, influenced by positive cloud services trends and contributions from artificial intelligence, including generational AI technologies. With revenue growth of 11.93% and EBITDA of $111.58 billion in the last twelve months, these factors have led to a modest increase in the 2025/26 estimates for Amazon. InvestingPro subscribers can access 14+ additional exclusive insights about Amazon's growth trajectory and AI potential.
Despite the upgrade, the analyst anticipates that Amazon's operating margins may face pressure from various factors. The expectation is that increasing efficiency, including cost to serve, will be partly offset by normalizing AWS margins, investments in Project Kuiper, depreciation, and potential new hiring activities.
The revised $260 price target is based on a combination of valuation approaches, including sum-of-the-parts analysis, a 15 times multiple on the projected 2026 enterprise value to EBITDA (EV/EBITDA), and a longer-term discounted cash flow (DCF) model. These methods reflect a comprehensive evaluation of Amazon's various business segments and their expected future performance.
In summary, Baird's updated assessment of Amazon reflects a belief in the company's continued growth and leadership in e-commerce, advertising, and cloud computing, while also acknowledging potential cost pressures that may impact profitability in the coming years.
In other recent news, Amazon.com Inc (NASDAQ:AMZN). continues to impress with its Q3 revenue reaching $620.13 billion, surpassing expectations. This comes as TD Cowen and Bernstein SocGen Group both maintain their confidence in the tech giant, reiterating their Buy and Outperform ratings respectively.
The optimistic stances are underpinned by factors such as Amazon's operating margin expansion, accelerated revenue growth in Amazon Web Services (AWS), and the potential for capital allocation due to a growing net cash position.
In addition, Amazon has established a strategic partnership with Intuit Inc (NASDAQ:INTU)., positioning QuickBooks as the preferred financial management solution for Amazon sellers. This collaboration is expected to provide integrated financial tools to millions of Amazon sellers, facilitating real-time financial updates and streamlined tax filing.
Furthermore, Amazon and Walmart (NYSE:WMT) Inc. reported record-breaking sales during recent Black Friday and Cyber Monday events. These sales successes highlight the companies' strong operational efficiency and strategic decision-making.
Piper Sandler analysts have expressed a robust outlook for tech stocks, based on a strong outlook for IT spending, which bodes well for Amazon and other tech giants.
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