Amazon Analysts Predict Upside For Stock Into Q2 Earnings: 'Prior Headwinds ... Turn Into Tailwinds'

Multiple analysts have weighed in on Amazon.com Inc AMZN stock this week as the e-commerce giant’s annual Prime Day event gets rolling. The consensus view is that Amazon is positioned for further upside heading into earnings.

AWS Growth: Wolfe Research analyst Shweta Khajuria initiated coverage on Amazon Tuesday with an Outperform rating and $250 price target.

Khajuria’s bull case for Amazon is centered around Amazon Web Services (AWS) growth acceleration, margin expansion and retail share gains.

“In terms of near-to-mid-term fundamentals, we like the 2024 setup for Amazon,” the analyst said in a new note.

“We expect accelerating Y/Y growth at AWS this year, ongoing Retail margin expansion, share gains in eCommerce driven by faster delivery speeds and mix-shift to everyday essentials, and new growth catalysts in the form of Prime Video, Grocery, and Amazon Logistics—to name a few.”

The Wolfe Research analyst said AWS growth is poised to trend higher driven by rising consumption, generative AI product adoption and secular tailwinds. Khajuria also highlighted meaningful margin expansion potential driven by AWS growth, extended server life and operating efficiency.

Prime Day Is Here: On the retail side of the business, the analyst expects Amazon to benefit as consumers consolidate spending toward the largest retailers and the company continues to take share by offering faster delivery times.

Amazon’s 2024 Prime Day is taking place on Tuesday and Wednesday. Prime members have access to millions of exclusive deals spanning more than 35 categories including electronics, kitchen, beauty and apparel.

In a note to clients on Tuesday, Benchmark analyst Daniel Kurnos predicted this year’s Prime Day event will be Amazon’s biggest ever. Amazon said Prime members bought more than 375 million items worldwide during the two-day event last year.

Still, Kurnos warned that some outlets are expecting Amazon’s e-commerce share during Prime Day to shrink as more and more competitors run deals to try to keep up with Amazon during this period. The Prime Day numbers will help boost Amazon’s third-quarter results, but second-quarter earnings are only about two weeks away.

Check This Out: Amazon Set To Top Last Year’s Prime Day Results Due To Early Deals, Analysts Say

Amazon Earnings On Deck: The Benchmark analyst reiterated Amazon with a Buy rating and maintained a price target of $200 ahead of earnings.

As Amazon shares have climbed higher this year, consensus estimates have gone up too, Kurnos said.

“We suspect that the underlying initiatives and excitement around things like AI and better cost controls are still likely to carry the day but think it is fair to wonder if there is less margin for error in the back half of the year,” the analyst said.

Finally, Goldman Sachs analyst Eric Sheridan released a new note on Amazon this week previewing second-quarter earnings. The analyst raised his operating income estimate citing margin optimism, which now puts the estimate about 8% above consensus, he said.

Sheridan expects three main investor debates to be settled when Amazon reports earnings, including the overall health of the consumer, the ability for the company to continue to drive margin upside and the trajectory of AWS revenue growth. The Goldman analyst believes these are key to driving incremental share price performance.

“We continue to expect reacceleration through 2024 as prior headwinds around optimization and workload migration turn into tailwinds and AI workloads are a rising tailwind,” Sheridan said.

Goldman reiterated its Buy rating on Amazon and raised its price target from $225 to $250.

AMZN Price Action: Amazon shares were up 0.12% at $192.94 at the time of publication Tuesday, according to Benzinga Pro.

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Photo: courtesy of Amazon.

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