Redburn maintains Amazon stock Buy rating, $280 target

On Friday, Redburn-Atlantic maintained its optimistic stance on Amazon.com (NASDAQ:AMZN) shares, reiterating a Buy rating and a $280.00 price target. Currently trading at $238.83, Amazon’s stock has shown remarkable momentum with a 46.73% gain over the past six months. The firm’s analyst, Alex Haissl, highlighted the company’s competent management of overcapacity issues, particularly in its e-commerce segment. According to InvestingPro analysis, Amazon currently trades slightly above its Fair Value, reflecting strong market confidence in its execution.

Amazon’s management has been adept at adding capacity in response to actual demand, a strategy that has worked well for the company in the past. This efficiency is reflected in the company’s strong financial metrics, with InvestingPro data showing revenue growth of 11.93% over the last twelve months to $620.13 billion. This approach has been underscored by the recent overbuild concerns that have also affected other tech giants like Alphabet (NASDAQ:GOOGL) and Microsoft (NASDAQ:MSFT). Amazon’s management emphasized that their capacity additions are a direct response to demand signals, and they expect that efficiencies from their DeepSeek AI across training and inference will spur even greater demand as costs decrease.

The company has a track record of effectively managing overcapacity, as evidenced by its non-advertising e-commerce margin for the fourth quarter of 2024, which returned to levels seen in 2018, despite a 2.5-fold increase in revenue over the same period.

Looking forward, Amazon has provided guidance for the first quarter of 2025 with revenue expectations ranging from $151 billion to $155.5 billion, slightly below the consensus of $158.6 billion. Operating income is also projected to be modest, estimated between $14.0 billion and $18.0 billion, compared to the anticipated $18.3 billion. However, the shortfall in revenue guidance is fully accounted for by a $3.6 billion impact due to foreign exchange rates and the Leap Year. Haissl suggests that the profit guidance may be seen as conservative, especially considering Amazon’s substantial beat in the fourth quarter of 2024.

Investors and market watchers will likely keep a close eye on how Amazon’s strategies for capacity management and cost efficiency in AWS and other segments continue to support the company’s financial performance in the face of industry challenges and economic headwinds. With a highly bullish analyst consensus rating of 1.39 (where 1 is Strong Buy) and an excellent Financial Health score of 3.16 out of 5 according to InvestingPro, which offers 15+ additional exclusive insights and detailed analysis in its comprehensive Pro Research Report, Amazon appears well-positioned to maintain its market leadership.

In other recent news, Amazon.com Inc. has seen a series of adjustments to its stock price target by several financial firms following its Q4 performance. RBC Capital Markets raised Amazon’s price target from $255.00 to $265.00, maintaining an Outperform rating. The firm noted Amazon’s mixed Q4 results, with underperformance in third-party seller services and advertising revenues offset by strong figures from Amazon Web Services (AWS) and a boost in EBIT (earnings before interest and taxes).

Cantor Fitzgerald held its Overweight rating and a price target of $270.00, with analyst Deepak Mathivanan highlighting Amazon’s revenue being in line with expectations and EBIT exceeding Wall Street estimates. Telsey Advisory Group reiterated its Outperform rating and a $275.00 price target, praising Amazon’s Q4 performance and Q1 guidance. BMO Capital Markets increased the price target to $280 from the previous $265 due to AWS’s potential growth.

Lastly, BofA Securities analyst Justin Post increased the price target from $255.00 to $257.00, while maintaining a Buy rating, following Amazon’s reported revenue and profit surpassing expectations. These updates reflect recent developments within the company and the market’s response to its performance.

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