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Investing.com -- Needham & Company raised its price target for Amazon (NASDAQ:AMZN) to $265 from $220 in a note Tuesday, maintaining a Buy rating on the stock.
The firm cited improvements in labor productivity and ongoing margin gains in its services segments.
Analysts at Needham stated that “strong improvement in its labor productivity... is a lead indicator to upside share price performance.”
Furthermore, Needham highlighted several catalysts behind its more bullish view, including “strong AWS revenue growth and margin expansion in 2Q25” and “record-breaking prime days in 3Q25,” which it believes will drive further upside.
Crucially, the analysts pointed to structural cost reductions enabled by generative AI: “GenAI is lowering costs structurally in AMZN’s logistics infrastructure, and improving its automation efficiency.”
They also noted that “peak-tariff woes are behind AMZN.”
Needham argued that Amazon’s labor productivity trends offer insight into its underlying value creation. “We link the notion of employee quality to financial returns and argue that absolute returns, trends in returns and relative returns per employee are key quantitative metrics to determine whether a company employs high-quality (i.e., value creating) employees,” the firm wrote.
From a valuation standpoint, Needham sees Amazon as underappreciated relative to peers. “AMZN is inexpensive (our view), as it trades at the lowest EV/Revs and second-lowest EV/EBITDA multiple among the Big Tech companies we cover.”
The firm also reiterated its view that Amazon should be valued as a services business. “Service operating margins... are far larger and growing faster than AMZN’s core eCommerce business,” it stated, adding that services made up 59% of Amazon’s total sales in the first quarter of 2025.