Telsey cuts Amazon stock target to $235, maintains Outperform

On Wednesday, Telsey Advisory Group adjusted its price target for Amazon.com (NASDAQ:AMZN) shares, reducing it to $235 from the previous $275, while keeping an Outperform rating on the stock. Currently trading at $173.18, InvestingPro analysis suggests Amazon is slightly undervalued, with analysts maintaining a strong buy consensus. The revision reflects a cautious stance due to potential tariff impacts on consumer spending and operating costs, despite continued growth expectations.

Joseph Feldman of Telsey highlighted the factors that are anticipated to drive Amazon’s sales and profit growth through 2025. With current revenue of $638 billion and healthy growth of 11% year-over-year, these include sustained online spending, an expanded merchandise assortment, faster fulfillment, and robust demand for AWS cloud and AI-related services. Additionally, the growth of higher-margin categories like advertising, media, and AWS, a redesigned distribution network, and a focus on cost savings are expected to enhance the company’s profit profile, which already shows a robust 49% gross margin.

Amazon’s ability to capitalize on its Prime member base, small business relationships, and technological edge is projected to help it gain profitable market share. The company’s expansion into new business areas such as grocery, pharmacy, fashion, home, private brands, and Amazon Logistics is also anticipated to add value. The solid performance of AWS and the media and advertising segments are likely to continue supporting the retail division. InvestingPro reveals 8 additional key insights about Amazon’s market position and growth potential, available to subscribers.

Despite the positive outlook, Telsey expressed caution over the uncertainty surrounding tariffs, which could affect consumer spending and increase operating costs. Amazon’s significant exposure to China, both through first-party and third-party sellers who also invest in services like advertising and fulfillment, presents a risk factor.

The new price target of $235 is based on a lower EV/EBITDA multiple of 15x, down from 18x, applied to the firm’s 2025 adjusted EBITDA forecast of $163 billion. This adjustment takes into account the uncertain macroeconomic trends, including consumer spending patterns and incremental costs related to tariffs.

In other recent news, Amazon has announced the general availability of its Bedrock Intelligent Prompt Routing, a tool that optimizes request handling among different foundation models. This development follows enhancements driven by customer feedback and internal testing, aiming to improve automated routing between large language models. Meanwhile, UBS analysts have projected a slowdown in cloud infrastructure spending, potentially affecting major providers like Amazon, Microsoft (NASDAQ:MSFT), and Google (NASDAQ:GOOGL). The analysis suggests that while core cloud spending might decelerate, growth in AI-related expenditures could provide some balance. Additionally, Wells Fargo (NYSE:WFC) maintained its Equal Weight rating on Amazon, with a price target of $203, focusing on Amazon Web Services’ strategic pause in some leasing negotiations. This pause aligns with similar strategies seen at Microsoft, as both companies adjust after rapid expansion in lease agreements. Investors are keenly observing these developments as Amazon prepares to release its first-quarter earnings, which will shed more light on its financial health and cloud business trajectory.

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