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Investing.com - Bernstein has raised its price target on Amazon.com (NASDAQ:AMZN) stock to $235.00 from $230.00 while maintaining an Outperform rating, citing AWS growth and improving supply constraints. The tech giant, currently valued at $2.35 trillion, has demonstrated robust revenue growth of 10.08% over the last twelve months, according to InvestingPro data.
AWS growth decelerated sequentially in Q1 to 17% year-over-year, while AI contribution continues to grow triple digits annually, according to Bernstein. The firm notes Amazon remains supply constrained on chips, motherboards, and other components, which has temporarily limited topline growth despite strong demand indicators. Despite these challenges, InvestingPro analysis shows Amazon maintains excellent financial health with a "GREAT" overall score, supported by strong cash flows that adequately cover its moderate debt levels.
Management expects these constraints to ease throughout the year, with a May 15th press release highlighting more NVIDIA (NASDAQ:NVDA) Blackwell GPUs coming online, suggesting improvements already beginning in Q2. Bernstein’s data points to quarter-over-quarter improvement in year-over-year core revenue growth in Q2, with engagement accelerating to record levels.
Margins climbed to 39% in Q1, impressing investors even as Amazon reduced the useful life of some servers and retired equipment earlier than planned. Bernstein expects margins to slowly moderate to the low 30s steady-state levels by 2027. The company maintains a healthy gross profit margin of 49.16% and trades at a P/E ratio of 35.27. For deeper insights into Amazon’s valuation metrics and growth potential, investors can access comprehensive analysis through InvestingPro’s detailed research reports.
The firm values Amazon using a combined approach that includes a sum-of-the-parts method valuing Amazon’s retail segment at a 2026 estimated EV/Sales multiple of 2.5x (up from 2.4x previously), and a discounted cash flow analysis using a 9% weighted average cost of capital and a 3.5% terminal growth rate. Based on current market prices, InvestingPro’s Fair Value analysis suggests Amazon is slightly overvalued, though the stock has shown strong momentum with a 15.55% return over the past year.
In other recent news, Amazon Web Services (AWS) has experienced a significant leadership change with the departure of Vasi Philomin, a key executive in its generative AI division. Rajesh Sheth has assumed some of Philomin’s responsibilities, as Amazon continues to enhance its AI capabilities, including a substantial $8 billion investment in AI startup Anthropic. Meanwhile, Amazon’s Ring has introduced a new AI feature called Smart Video Search, allowing users to efficiently search video footage using text queries. This feature, part of a revamped subscription service, is initially available in public beta and will officially launch in November 2024.
Additionally, AWS has expanded its collaboration with Veeva Systems (NYSE:VEEV) to support Veeva’s life sciences cloud applications, reinforcing a partnership that spans over a decade. This collaboration aims to enhance security, performance, and scalability for Veeva’s suite of applications. In another development, Amazon announced plans to expand its Same-Day and Next-Day Delivery services to over 4,000 rural communities across the U.S. by 2025, supported by a $4 billion investment in its delivery network.
Lastly, Oppenheimer has raised its price target for Amazon to $250 from $215, maintaining an Outperform rating. The firm cited improved margin expectations and highlighted Amazon’s strategic use of AI to potentially limit headcount growth in the future.
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