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On Monday, BofA Securities maintained a Buy rating on Amazon.com (NASDAQ:AMZN) with a steadfast price target of $225.00. The firm’s analysis highlighted the growing price-to-earnings (P/E) ratio discount of Amazon compared to Walmart (NYSE:WMT), noting that Amazon’s valuation is now at 23 times its projected 2026 GAAP P/E. This figure aligns with that of Microsoft (NASDAQ:MSFT) and stands at a discount to Walmart’s 32 times valuation. Currently trading at a P/E of 30.51 with a market capitalization of $1.83 trillion, InvestingPro analysis suggests Amazon is trading below its Fair Value, presenting a potential opportunity for investors.
The commentary from BofA Securities addressed Amazon’s recent performance issues relative to Walmart and Microsoft. Factors such as Amazon’s higher exposure to China and a lesser focus on groceries were identified as contributing to its underperformance against Walmart. Amidst this backdrop, Amazon’s cloud computing division, AWS, was discussed as a potential downside support for the company’s valuation. The company maintains strong fundamentals with revenue growth of 11% and EBITDA of $120.47 billion in the last twelve months.
BofA Securities also referenced investor sentiments, which varied from short-term optimism spurred by Amazon CEO Andy Jassy’s recent interview, where he observed no changes in consumer behavior, to concerns over the impact of tariffs and a potential economic downturn on Amazon’s retail and advertising segments. Despite these concerns, the firm remains confident in Amazon’s strategic positioning.
The analysis by BofA Securities suggests that while there are short-term uncertainties affecting Amazon, the company’s prospects for growth in artificial intelligence and improvements in retail margins keep it in a favorable position. The firm’s reiteration of the Buy rating indicates a continued positive outlook for Amazon’s stock performance.
In other recent news, Amazon.com has been the subject of several analyst revisions and developments. Raymond (NSE:RYMD) James downgraded Amazon’s stock rating from Strong Buy to Outperform, citing pressures on earnings before interest and taxes (EBIT) due to macroeconomic factors and investment demands. The firm lowered its price target to $195, highlighting challenges in the company’s supply chain and logistics efforts. BMO Capital Markets also adjusted its outlook, reducing Amazon’s price target to $235 while maintaining an Outperform rating. This decision was influenced by a softening demand for Amazon Web Services (AWS) and concerns over tariffs impacting pricing and gross merchandise volume. Meanwhile, Cantor Fitzgerald maintained an Overweight rating on Amazon but cut its price target to $230, noting the disruptive impact of tariffs but also potential gains in market share from physical retail. Additionally, Amazon Web Services experienced a network interruption affecting cryptocurrency exchanges Binance and KuCoin, underscoring the risks of centralized cloud infrastructure. Despite these challenges, analysts from these firms recognize Amazon’s strengths in AI and fulfillment capabilities as factors that could mitigate some negative impacts.
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