Piper Sandler raises Amazon stock price target to $265

On Friday, Piper Sandler adjusted its financial outlook for Amazon.com (NASDAQ:AMZN), increasing the price target to $265 from the previous $225, while maintaining an Overweight rating on the company’s shares. As a prominent player in the Broadline Retail industry with a market capitalization of $2.5 trillion, Amazon currently trades above its InvestingPro Fair Value, reflecting strong investor confidence in its growth trajectory. This change reflects the firm’s analysis of Amazon’s fourth-quarter results, which surpassed expectations, despite the company providing weaker guidance for the future, influenced in part by foreign exchange rates.

The e-commerce giant reported a fourth-quarter EBIT (earnings before interest and taxes) of $21.2 billion, topping the high end of its guidance, which was set at $20 billion. The company’s strong performance is reflected in its impressive trailing twelve-month revenue of $620.1 billion and healthy gross profit margin of 48.4%. However, the first-quarter guidance for 2025 was not as optimistic as anticipated, with projected revenues between $151 and $155 billion, including a $2.1 billion headwind from foreign exchange and a $1.5 billion impact from the leap year. The operating income forecast was set at $14 to $18 billion, which falls short of the Street’s expectations of $159 billion in revenue and $18.3 billion in operating income.

Piper Sandler’s analysts also noted that Amazon’s capital expenditures are expected to rise substantially as the company concludes 2024 with a run-rate exceeding $100 billion, spurred by investments in artificial intelligence. Despite these significant investments, the firm believes that Amazon is poised to benefit from an emerging AI product cycle within its AWS (Amazon Web Services) segment and is making strides in reducing the cost to serve its customers.

The analysts have lowered their estimates for the first half of 2025 but have increased their projections for the outer years. They justify the heightened capital expenditures on AI as a sensible move for Amazon, highlighting the potential for leverage in the e-commerce sector. With a remarkable 46.7% price return over the past six months and trading near its 52-week high, Amazon continues to demonstrate strong momentum. InvestingPro subscribers can access 15 additional exclusive tips and comprehensive analysis through the Pro Research Report, offering deeper insights into Amazon’s financial health and growth prospects. The revised price target of $265 reflects Piper Sandler’s confidence in Amazon’s strategic investments and its ability to innovate and maintain a competitive edge in the industry.

In other recent news, Amazon is set to introduce a significant update to its Alexa AI voice service, as reported by insiders. This overhaul, the largest since Alexa’s inception, will enable the digital assistant to manage multiple tasks simultaneously, potentially functioning as an "agent" for users. The company plans to initially offer this service to a limited number of users free of charge, with a potential monthly fee being considered for the future.

Meanwhile, Amazon Web Services (AWS), an Amazon subsidiary, has broadened its strategic partnership with diversified services group Bouygues (EPA:BOUY) to accelerate digital transformation across multiple sectors. The collaboration will leverage artificial intelligence to enhance operations, stimulate growth, and launch innovative services, including an AI application called LegalAize.

In legal news, Amazon faces action from the Federation of National Trade Unions following the closure of its warehouses in Quebec, Canada. The union seeks to nullify the layoffs and mandate the reopening of the facilities, while also pursuing compensation for affected employees.

In analyst updates, Benchmark has raised Amazon’s stock price target to $265 from $215, maintaining a Buy rating. The firm expects a strong fourth-quarter earnings report from Amazon, potentially surpassing market estimates. BofA Securities also maintains a Buy rating on Amazon, holding a $255 price target and projecting robust fourth-quarter sales and GAAP operating profit.

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