On Friday, BMO Capital Markets adjusted its outlook on Amazon.com, Inc. (NASDAQ:AMZN) shares, increasing the price target to $265 from the previous $236, while retaining an Outperform rating. This aligns with the broader Wall Street sentiment, as InvestingPro data shows analysts maintain a strong buy consensus on the $2.37 trillion tech giant. The adjustment comes amid expectations for Amazon Web Services (AWS) to experience an uptick in growth, propelled by continuous innovation and the expansion of its customer base.
BMO Capital’s analyst underlined AWS’s potential to capitalize on a market opportunity surpassing $5 trillion. The firm forecasts a surge in AWS’s growth to 20% by the year 2025, an increase from the earlier estimate of 17%. This ambitious target builds on Amazon’s strong performance, with revenue growing nearly 12% over the last twelve months to $620 billion. This growth projection is supported by AWS’s ability to tap into existing IT spending and additional artificial intelligence workloads. The analysis suggests that AWS’s most substantial clients, who currently have between 10-40% of their workloads in the cloud, could potentially increase this to 70-80% or more due to consistent technological advancements.
The analyst also highlighted the positive trends in Amazon’s retail segment. Channel checks have shown a promising uptake of Same-Day and Next-Day delivery options, which are expected to boost the frequency of purchases and, in turn, enhance the company’s free cash flow potential.
BMO Capital’s revised price target reflects a bullish stance on Amazon’s ability to sustain growth in both its cloud computing division and its core retail operations. The firm’s analysis points to significant customer adoption and innovation as key drivers for Amazon’s continued success in the marketplace. InvestingPro analysis reinforces this outlook, assigning Amazon a "GREAT" financial health score, with particularly strong marks in growth and profitability. For deeper insights into Amazon’s valuation and growth metrics, investors can access the comprehensive Pro Research Report, available exclusively on InvestingPro.
In other recent news, Blue Origin, owned by Jeff Bezos, announced the successful launch of its New Glenn rocket, marking a significant milestone for the company. The rocket reached its intended orbit during the NG-1 mission, with the Blue Ring Pathfinder functioning well and receiving data. However, the booster was lost during descent. Blue Origin plans another launch in spring 2025 and aims to establish a sustained human presence on the Moon and harvest in-space resources.
In other developments, Teladoc (NYSE:TDOC) Health announced a partnership with Amazon to enhance access to its chronic condition programs through Amazon’s Health Benefits Connector. The collaboration is expected to streamline the enrollment process and make Teladoc Health’s diabetes, hypertension, pre-diabetes, and weight management programs more accessible to Amazon customers.
Amazon’s stock has been maintained at a Buy rating by both Truist Securities and HSBC due to strong profitability and better-than-expected North American revenue growth. Truist Securities named Amazon their favorite mega cap, citing steady gains in advertising revenue and the performance of Amazon Web Services (AWS). Meanwhile, HSBC raised Amazon’s stock target by 20%, reflecting a positive outlook for the company’s business model and profitability in 2025.
In the e-commerce sector, Bernstein analysts see Walmart (NYSE:WMT) as a potential leader in the e-grocery space, despite Amazon’s current dominance. Walmart’s significant scale and grocery expertise may provide a strategic advantage, with staple items constituting nearly 70% of their sales compared to 53% at Amazon.
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