On Thursday, BofA Securities maintained a Buy rating and a $210.00 price target for Amazon.com (NASDAQ:AMZN) stock. The firm's stance is based on several factors, including expectations for the company's third-quarter performance, which is anticipated to be mixed. The retail sector is projected to meet expectations, while Amazon Web Services (AWS) is predicted to surpass them. However, there may be some potential pressure on third-party (3P) fees.
The analyst noted that near-term concerns about guidance from the Street could actually benefit the stock if Amazon's outlook does not bring any negative surprises. Looking at the medium term, the firm identifies Amazon's exposure to the growing demand for AI-driven cloud services as a primary reason for owning the stock. Additionally, there is an expectation that retail margin growth could pick up again in the second half of 2025 if the mix shift to consumables normalizes.
The valuation of Amazon's stock is deemed attractive by BofA Securities, particularly when compared to its peers. The firm highlighted Amazon's valuation at 28 times its estimated earnings per share (EPS) for 2026, which is lower than the Street's projection. This valuation is in line with Microsoft (NASDAQ:MSFT)'s and slightly higher than Walmart (NYSE:WMT)'s, based on their respective EPS valuations at the end of their fiscal years.
BofA Securities' assessment underscores Amazon's dual leadership in cloud services through AWS and in the US online retail market. The firm's analysis suggests confidence in Amazon's potential for growth and profitability, especially in the context of its current valuation relative to industry counterparts.
In summary, BofA Securities reaffirmed its positive outlook on Amazon, emphasizing the company's strategic positioning in high-growth areas such as cloud computing and AI, alongside the potential for margin improvement in its retail segment. The reiterated Buy rating and $210.00 price target reflect the firm's belief in Amazon's continued success and investment appeal.
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