Analysts see 'more upside ahead' for Amazon stock

Analysts at Jefferies and MoffettNathanson see more upside ahead for powerhouse Amazon (NASDAQ:), with both firms reiterating their bullish views of the stock in notes on Monday.

Analysts told investors in a note titled “61 billion reasons to buy the stock” that with Amazon’s FY24 consensus EBIT estimates revised +60% higher in the last twelve months and the equity +64% compared to the S&P at +20%, “one would be forgiven for thinking all the juice has been squeezed.” However, forecasts suggest there’s more.

“Advertising, cost to serve leverage, and 1P gross margin expansion drive upside to estimates,” said the firm. “We forecast consolidated advertising revenue to CAGR at 20% through 2026 supported by 16% growth from onsite ads and 36% growth on non-core advertising. On a ~55% margin, Advertising EBIT moves from $26B in FY23 to $41B in FY26.”

MoffettNathanson, which has a Buy rating and $230 price target on Amazon, also noted that Amazon’s 1P business suffered from inflation and a retail inventory correction that compressed 1P gross margins. However, they believe the headwinds should flip to tailwinds in 2024 to the tune of $2 billion in gross profit improvement.

Meanwhile, analysts at Jefferies believe there is “more upside ahead” for Amazon, with accelerating AWS growth and a beat on operating income as “key drivers to stock outperformance off the Q1 print.”

“For Q1, we model a Net Sales deceleration to 12% (from 14%) as an AWS acceleration to 15% growth is offset by decelerations in every other segment,” said the firm. “AMZN remains committed to ‘harvest mode’ and we believe AMZN is in front of a multi-year margin expansion opportunity.”

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The firm feels that Amazon shares are attractively valued and reiterated a Buy rating and $225 price target on the stock.


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