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On Monday, Phillip Securities adjusted its stance on Amazon.com (NASDAQ:AMZN) shares, downgrading the rating from Buy to Accumulate while increasing the price target from $240 to $270. The revision follows the company’s fourth-quarter 2024 performance, which aligned with market expectations and showcased a higher than anticipated Profit After Tax and Minority Interest (PATMI) due to improved operating margins and stringent cost management. According to InvestingPro data, Amazon currently trades at $229.15, with analyst targets ranging from $207 to $306. The stock appears slightly overvalued based on InvestingPro’s proprietary Fair Value model.
For the fiscal year 2024, Amazon’s revenue and PATMI reached 100% and 112% of Phillip Securities’ estimates, respectively. The company achieved impressive total revenue of $637.96 billion with an EBITDA of $121.39 billion. The firm highlighted Amazon Web Services (AWS) as a key revenue contributor, noting its 19% year-over-year growth. AWS’s operating margin witnessed a significant increase, jumping 7.3% from the previous year to 36.9%, attributed to effective cost controls and extended server lifespans, which resulted in a 200 basis point margin expansion. InvestingPro analysis shows Amazon maintains a strong financial health score, with particularly high marks in growth and profitability metrics.
Phillip Securities also provided insights into future expectations, rolling over valuations for an additional year. The firm slightly lowered its revenue and PATMI projections for FY25 by 1% to account for the leap-year effect, a reduction in the useful life of services, and an increase in the lifespan of heavy equipment. Despite these adjustments, the analyst’s outlook on Amazon remains positive, particularly regarding its positioning in generative AI and potential growth from ongoing cloud migration, which is still considered to be in its early stages. InvestingPro data reveals a projected revenue growth of 9% for FY25, with an expected EPS of $6.36.
The decision to downgrade the stock rating from Buy to Accumulate comes in the wake of Amazon’s recent share price appreciation, with InvestingPro showing a substantial 37.26% return over the past six months. Nevertheless, Phillip Securities’ raised Discounted Cash Flow (DCF) target price to $270 indicates confidence in the company’s long-term value and its strategic position within the industry. For deeper insights into Amazon’s valuation and growth prospects, investors can access the comprehensive Pro Research Report, available exclusively on InvestingPro, which covers over 1,400 US equities with detailed analysis and actionable intelligence.
In other recent news, Amazon MGM Studios is planning to establish an international theatrical distribution arm for its future films, a shift from the current arrangement with Warner Bros. UBS and Truist Securities have revised their price targets for Amazon, with UBS reducing it from $275 to $272 and Truist reducing it from $270 to $265, both firms, however, maintain a Buy rating. Benchmark, on the other hand, has raised its price target for Amazon from $265 to $270, maintaining a Buy rating as well.
In legal developments, Nokia (HE:NOKIA) has secured an injunction against Amazon in a German court over a streaming patent infringement. These are just a few of the recent developments involving Amazon.
The change in price targets by UBS, Truist, and Benchmark are based on Amazon’s capital expenditure forecast, the company’s Q4 2024 performance, and profit projections, respectively. Amazon’s capital investments, particularly in AWS, are part of its long-term growth strategy, which analysts believe positions Amazon to potentially realize significant increases in operating profit and free cash flow. Investors and market watchers are expected to pay close attention to Amazon’s forthcoming 10-K report for detailed financial disclosures.
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