Amazon is riding high on Wall Street, with analysts predicting a bright future for the e-commerce giant. Scotiabank analyst Nat Schindler initiated coverage on Amazon.com, Inc. (AMZN) with a Sector Outperform rating and a price target of $245 per share, emphasizing the company’s dominant position across various verticals.
Schindler highlights Amazon Web Services (AWS) as a key driver of growth, expecting revenue growth to surpass consensus estimates beyond 2025. The analyst points to the burgeoning AI business within AWS, characterized by strong demand and significant growth potential. AWS’s focus on providing flexible and cost-effective AI solutions makes it a vital partner for companies embracing AI technologies. As a result, Schindler anticipates AWS maintaining a 15% revenue growth rate with impressive operating margins exceeding 30% beyond 2025.
While AWS drives the growth engine, Schindler expects Amazon’s Retail business to maintain a steady 5%-10% growth rate, albeit with lower margins. Growth catalysts like healthcare and grocery services have the potential to propel retail numbers even higher, potentially reaching the high single digits. Overall, the analyst expects a positive upswing in operating income over the next 2-4 years, fueled by favorable macro conditions and cost optimization initiatives.
Echoing this optimistic sentiment, JP Morgan analyst Doug Anmuth reiterates Amazon as their top pick, driven by the robust growth of AWS and the company’s continued commitment to operational discipline. Anmuth projects an impressive operating income of $16 billion in Q4 and a staggering $70 billion in 2025. He attributes this growth to factors like easing optimizations, workload migrations, and the monetization of AI capabilities. The analyst also expects North America’s margins to improve, driven by enhancements in shipping, inventory management, and automation. Looking ahead, Anmuth anticipates a substantial free cash flow of $58 billion in 2024 and $72 billion in 2025, with potential for capital returns next year.
These positive projections are reflected in the current market sentiment, with AMZN shares up 1.42% at $189.30 at the last check on Friday. Investors are optimistic about the company’s Q3 performance, anticipating net sales of $157 billion to $158.5 billion, a 20%-21% growth in AWS revenue, and operating income of $14 billion to $15 billion plus.
With analysts bullish on Amazon’s future, the company appears poised for continued success, driven by its dominant market position, innovative technologies, and strategic focus on growth and profitability.
