Benchmark maintains Amazon stock Buy rating, $260 target

On Friday, Benchmark analysts maintained their Buy rating and $260.00 price target for Amazon.com (NASDAQ:AMZN) stock, aligning with broader analyst sentiment as revealed by InvestingPro data showing analyst targets ranging from $195 to $287. The firm’s analysis followed Amazon’s latest earnings report, which they described as solid yet unremarkable. The report met revenue expectations and exceeded operating income projections by nearly $1 billion, primarily due to strong performance from Amazon Web Services (AWS). With annual revenue reaching $638 billion and EBITDA of $120.5 billion, Amazon continues to demonstrate its market dominance.

Despite only reaching consensus estimates at the upper end of second-quarter operating income guidance, Amazon’s revenue guidance surpassed midpoint consensus. Benchmark analysts acknowledged overlooking several Amazon initiatives that, in retrospect, could have made the operating income guidance more favorable. These initiatives include Amazon’s focus on everyday essentials and competitive pricing, possibly to gain market share even if it does not directly benefit shareholders. InvestingPro analysis indicates Amazon operates with a moderate level of debt (Debt/Equity ratio of 0.54) while maintaining strong cash flows to cover interest payments, suggesting financial flexibility to pursue these strategic initiatives.

Amazon’s stock experienced a modest 3% decline in after-hours trading, indicating that investor concerns were less severe than anticipated. This aligns with Benchmark’s previous assessment that sentiment around Amazon was more mixed than usual.

The analysts highlighted that while there are uncertainties, particularly regarding Amazon’s exposure to China, the company is expected to continue gaining market share. They emphasized the importance of AWS’s sustained performance and Amazon’s ability to find operational efficiencies in its fulfillment business. According to Benchmark, Amazon remains a fundamental holding, offering an attractive risk-reward profile at its current valuation.

In other recent news, Amazon.com has reported strong first-quarter earnings, with both revenue and operating income exceeding expectations. The company has provided a second-quarter operating income forecast ranging from $13 billion to $17.5 billion, indicating its ability to navigate current economic challenges. Amazon Web Services (AWS) continues to perform well, with margins reaching a record high, although its growth slightly decelerated to 17%. Analysts from firms such as JPMorgan, Cantor Fitzgerald, and JMP Securities have maintained or raised their price targets for Amazon, citing confidence in the company’s growth trajectory. Cantor Fitzgerald increased its target to $240, while JMP Securities raised it to $250, both maintaining an Overweight or Market Outperform rating.

Conversely, Susquehanna and Evercore ISI have lowered their price targets to $225 and $260, respectively, while maintaining positive ratings. These adjustments reflect a mix of achievements and challenges, including solid revenue growth and concerns over softer operating income guidance. Amazon’s advertising revenue showed strong growth, and the company is focusing on enhancing customer experience amidst tariff uncertainties. Despite some deceleration in AWS growth, analysts are optimistic about Amazon’s long-term prospects, particularly with anticipated improvements in supply constraints and the expansion of AI Cloud services. Overall, Amazon’s recent performance has been met with cautious optimism from analysts, reflecting confidence in its resilience and strategic focus.

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