Analysts predict further growth potential for Amazon stock

Analysts predict further growth potential for Amazon stock

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

Analysts told investors in a note titled “61 Billion Reasons to Buy the Stock” that with Amazon’s consensus estimates for FY24, revised EBIT +60% higher over the twelve Recent months and equity at +64% versus the S&P at +20%, “one would be forgiven for thinking all the juice has been squeezed.” However, forecasts suggest there is more.

“Advertising, cost-to-serve leverage and 1P gross margin expansion are driving estimates higher,” the company said. “We forecast a consolidated advertising revenue CAGR of 20% through 2026, supported by 16% growth in on-site advertising and 36% in non-essential advertising. By a ~55% margin, advertising EBIT increases from $26 billion in FY23 to $41 billion in FY26.”

MoffettNathanson, who has a buy rating and $230 price target on Amazon, also noted that Amazon’s 1P business was suffering from inflation and a correction in retail inventory that have compressed margins raw 1P. However, they estimate that headwinds are expected to turn into tailwinds in 2024, resulting in a $2 billion improvement in gross margin.

Meanwhile, analysts at Jefferies believe there is “more upside ahead” for Amazon, with accelerating AWS growth and higher operating profit as “key drivers of the stock’s outperformance compared to the first quarter.

“For the first quarter, we model a deceleration in net sales to 12% (from 14%), as an acceleration in AWS growth to 15% is offset by decelerations in all other segments,” the company said . “AMZN remains committed to ‘harvest mode’ and we believe AMZN has a multi-year margin expansion opportunity.”

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The company believes Amazon shares are attractively valued and reiterated a Buy rating and $225 price target on the stock.

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