Analysts at Wedbush Securities have sounded an optimistic note about Amazon.com Inc.’s AMZN prospects, thanks to its performance in the retail segment. They are also bullish on Amazon’s rising operating margins, growth of the Amazon Web Services business, and AI monetization.
What Happened: Ahead of Amazon’s second-quarter results, scheduled to be released on Aug. 1, Wedbush analysts have laid out their bull thesis for the company with a price target of $225 in 12 months. The analysts are confident in Amazon’s position within their coverage group and have maintained an Outperform rating for the company.
Wedbush expects AWS growth of over 18% year-over-year in the second quarter, above the consensus of over 16.9%. “During the call, we will be listening for commentary related to AI’s contribution to AWS as well as the broader business,” analysts wrote.
Amazon’s AWS growth accelerated by 400bps in the last quarter, and a modest acceleration is expected in the second quarter. The analysts view the strength of Alphabet Inc.’s GOOG GOOGL Google’s Cloud segment as a positive sign for AWS.
The analysts are closely monitoring several key factors, including the retail segment’s performance, the growth of AWS, and the company’s AI monetization. They have also highlighted the potential impact of capital expenditure requirements to support infrastructure and AI investments.
Despite some concerns about Amazon’s second-quarter revenue guidance and recent questions about Prime Day results, analysts believe that Amazon is relatively insulated from recent competitive threats and continues to gain market share in the retail and e-commerce sectors.
“While investor sentiment is broadly positive, we think weak 2Q revenue guidance and more recent questions surrounding Prime Day results early in 3Q have reignited debates related to eCommerce competition.”
“We believe slowing retail segment growth in 2Q is primarily macro and comp driven this quarter rather than a symptom of larger competitive issues, and our survey work supports our view that Amazon is relatively insulated from recent competitive threats and continues to gain market share of retail and eCommerce,” the analysts wrote.
Why It Matters: Amazon’s recent strategic moves further underscore its growth trajectory in the cloud and advertising sectors. Earlier in July, multiple analysts, including Wolfe Research‘s Shweta Khajuria, predicted an upside for Amazon stock in second-quarter earnings. Khajuria’s bull case centers around AWS growth acceleration, margin expansion, and retail share gains.
As the second-quarter earnings season approached, JPMorgan analyst Doug Anmuth highlighted Amazon as a top pick, alongside Uber Technologies Inc. and Google. Despite concerns about consumer spending slowdowns, Anmuth remains optimistic about these large-cap names.
In June, Amazon disclosed plans to invest billions in Taiwan over the next 15 years to establish data centers, expanding its global footprint in Asia.
Price Action: Amazon stock closed at $179.85 on Thursday, down 0.54%. In after-hours trading, the stock rose 0.24%. Year to date, Amazon has gained 19.96%, according to data from Benzinga Pro.
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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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