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On Friday, Morgan Stanley (NYSE:MS) reaffirmed its confidence in Amazon.com Inc (NASDAQ:AMZN), maintaining an Overweight rating and a price target of $250.00. The firm’s analysts highlighted Amazon’s potential for continued retail market share gains, driven by its logistics expertise and advancements in generative AI technology. This aligns with the broader Wall Street sentiment, as InvestingPro data shows a strong analyst consensus recommendation of 1.41 (Strong Buy). Currently trading at $190.20, Amazon maintains a substantial market capitalization of $2.02 trillion, though its P/E ratio of 33.69 suggests a premium valuation. Despite this optimistic outlook, Morgan Stanley expressed caution due to current uncertainties surrounding the cost implications of delivering a superior experience for Amazon’s buyers and sellers.
The analysts noted that the second half of 2025 and the year 2026 present a cloudy picture regarding the costs associated with a new China tariff agreement. The details of the timing, structure, and size of this agreement are still unknown, which has led Morgan Stanley to adopt a conservative stance. According to InvestingPro analysis, Amazon maintains a healthy financial position with good debt management and strong cash flows, earning a "GOOD" overall Financial Health score. The current model assumes a 14.5% China tariff beginning in the third quarter of 2025, along with increased costs for first-party and third-party sellers, weaker demand, higher logistics expenses, and advertising revenue challenges.
Despite these concerns, Morgan Stanley’s forecast for Amazon’s earnings before interest and taxes (EBIT) and earnings per share (EPS) for 2026 has been adjusted upward by 2% and 3%, respectively. This adjustment is primarily attributed to higher anticipated EBIT from Amazon Web Services (AWS) and a slight increase in retail revenue. Supporting this optimistic view, InvestingPro data shows Amazon achieved impressive revenue growth of 11% over the last twelve months, with total revenue reaching $638 billion. The analysts were also encouraged by the higher-than-expected revenue guidance for the second quarter of 2025, which exceeded their estimates by 2%.
While Morgan Stanley awaits more clarity on the China tariff situation, they believe that Amazon’s stock price may stay within a range of $150 to $200. The resolution of the tariff issue is seen as a potential catalyst for future revisions to earnings estimates. Until then, the firm suggests that Amazon’s stock performance may remain relatively stable. Based on comprehensive Fair Value analysis, InvestingPro models indicate Amazon is currently slightly undervalued. For deeper insights into Amazon’s valuation and growth prospects, investors can access the detailed Pro Research Report, available exclusively to InvestingPro subscribers, along with 10+ additional ProTips and extensive financial metrics.
In other recent news, Amazon reported its Q1 2025 earnings, exceeding Wall Street expectations with an earnings per share (EPS) of $1.59, surpassing the forecasted $1.37. The company’s revenue also outperformed projections, reaching $155.7 billion compared to the anticipated $155.29 billion. Despite these strong financials, Amazon’s stock experienced a decline in after-hours trading. Amazon Web Services (AWS) remains a critical revenue driver, posting a 17% year-over-year increase, contributing to the company’s robust overall performance. Looking ahead, Amazon’s guidance for Q2 2025 forecasts net sales between $159 billion and $164 billion.
HSBC analysts recently adjusted their price target for Amazon, lowering it to $240 from $280, while maintaining a Buy rating. This decision reflects ongoing concerns about tariff uncertainties affecting the market. Despite these challenges, HSBC’s analysis emphasizes Amazon’s strong strategic position, particularly highlighting the significance of AWS, which accounts for a substantial portion of the company’s valuation. The firm anticipates a potential 26% upside to the newly set price target, projecting significant potential gains for Amazon stock. These developments indicate continued confidence in Amazon’s strategic direction and market positioning amidst economic headwinds.
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