What the bad jobs report means for markets
On Tuesday, Wolfe Research adjusted its price target for Amazon.com (NASDAQ:AMZN) shares, reducing it from $270.00 to $200.00, yet reaffirmed its Outperform rating. The firm's analysts noted that Amazon stock is currently reflecting potential downside in operating income and revenue due to the impact of tariffs. With the stock currently trading at $175.26 and a market capitalization of $1.86 trillion, InvestingPro analysis indicates Amazon is currently undervalued. Despite Wolfe Research's estimates being more conservative than those of other Wall Street firms, they believe Amazon is trading at a reasonable 22 times their projected earnings per share for 2026, while the current P/E ratio stands at 30.78x with a notably low PEG ratio of 0.35.
The analysts emphasized Amazon's potential to gain market share in a challenging economic climate. They expect that Amazon will not significantly raise prices compared to its competitors, which could be an advantage. Additionally, the company's mix of non-discretionary goods and subscription revenue from its Prime service is seen as a positive. With revenue growing at 11% year-over-year and an InvestingPro Financial Health score of "GOOD," the company appears well-positioned for continued growth. Wolfe Research also pointed out that Amazon's advertising business appears to be outperforming, and the enterprise cloud segment is showing resilience due to long-term commitments.
For the first quarter, Wolfe Research anticipates that Amazon's revenue will align with consensus estimates and that operating income will surpass expectations. However, for the second quarter, they forecast that revenue may fall short of consensus estimates, while operating income guidance could be at the higher end of the spectrum.
The research concluded by mentioning that enterprise cloud demand, digital advertising trends, and retail sales have shown neutral to positive signals during the quarter. Currency fluctuations are expected to continue providing a tailwind. Capital expenditures (CapEx) remain an area of focus, and the analysts expect Amazon's management to maintain their previous guidance on this front.
In other recent news, Amazon has entered into a preliminary agreement with Airbus to enhance airline connectivity through Amazon's upcoming Kuiper satellite constellation. This collaboration aims to boost Airbus' High Bandwidth (NASDAQ:BAND) Connectivity Plus program, although specific financial terms and timelines have not been disclosed. Meanwhile, Wedbush Securities has maintained an Outperform rating for Amazon, setting a price target of $280. The firm highlights improvements in Amazon's Demand Side Platform, which strengthens its position in the digital advertising sector. Additionally, Amazon's Prime Video service has successfully transitioned to an ad-supported free tier, helping capture advertising dollars from other channels.
JMP Securities also reaffirmed a Market Outperform rating for Amazon, with a price target of $285, citing strategic initiatives like the inclusion of non-Amazon listed products in search results. This move is expected to expand Amazon's reach in the online retail space. Raymond (NSE:RYMD) James reports that Amazon continues to attract incremental ad budgets for sponsored products, benefiting from its transactional data. These developments reflect Amazon's ongoing efforts to diversify revenue streams and solidify its position in the competitive digital advertising market.
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