On Tuesday, Goldman Sachs reaffirmed its confidence in Amazon.com (NASDAQ:AMZN), maintaining a Buy rating and a $230.00 price target. The firm's analyst highlighted several key expectations for Amazon's third-quarter earnings report of 2024. These include sustained eCommerce demand, a strong advertising environment, and continued growth in Amazon Web Services (AWS).
The analyst pointed out that the trajectory of EBIT margins going into 2025 is a significant topic of debate among investors. To address this, the upcoming earnings report will introduce various analyses. These analyses will size up the investments in Project Kuiper, frame the losses in Devices and Services, delve into the drivers of Retail Margin, and examine the unit economics of Amazon's physical stores.
Goldman Sachs suggests that non-core investments by Amazon are substantial and increasing. The firm believes that providing segment disclosures around Devices & Services could offer investors a clearer view of Amazon's core profitability. This approach is likened to Alphabet (NASDAQ:GOOGL)'s Other Bets and Meta (NASDAQ:META)'s Reality Labs segment disclosures.
The analyst also supports Amazon's strategic decisions to invest in initiatives that meet consumer demands for lower-priced options and an expanded selection, including essentials. These investments are seen as sound for long-term strategy.
In conclusion, Goldman Sachs stands by its perspective that Amazon is well-positioned to deliver a strong combination of consolidated revenue growth and operating margin expansion over the coming years. This outlook is supported by Amazon's commitment to critical long-term growth investments. The firm reiterates its Buy rating and a 12-month price target of $230 for Amazon's stock.
In other recent news, Alphabet Inc.'s Google has sealed a deal with Kairos Power for the supply of nuclear energy. This arrangement, the first corporate purchase of electricity from small modular reactors (SMRs), aims to meet the growing energy needs of Google's AI operations. Kairos' inaugural SMR is expected to be operational by 2030, with additional reactors planned for 2035.
Simultaneously, Amazon.com Inc (NASDAQ:AMZN) has faced criticism from Indigenous groups in Para, Brazil, who claim they were not consulted in a carbon credit deal. The deal, involving the LEAF Coalition and a $180 million commitment, aims at Amazon rainforest conservation and includes several multinational companies.
On the analyst front, Amazon's stock has seen various ratings. Baird has maintained an Outperform rating, despite anticipated increased operating expenses due to infrastructure expansion. Wells Fargo has reiterated an Equal Weight rating, while Pivotal Research initiated coverage with a Buy rating, highlighting Amazon's growth potential, particularly in its AWS cloud segment.
InvestingPro Insights
Adding to Goldman Sachs' bullish outlook on Amazon, recent data from InvestingPro provides further context to the e-commerce giant's financial position. Amazon's market capitalization stands at an impressive $1.97 trillion, reflecting its dominant position in the market. The company's revenue for the last twelve months as of Q2 2024 reached $604.33 billion, with a notable 12.32% growth rate, aligning with Goldman's expectations of sustained eCommerce demand.
InvestingPro Tips highlight Amazon's strength as a "prominent player in the Broadline Retail industry" and its ability to generate "cash flows that can sufficiently cover interest payments." These factors support Goldman's positive stance on Amazon's long-term growth prospects.
While Amazon trades at a high P/E ratio of 43.86, an InvestingPro Tip notes that it's "trading at a low P/E ratio relative to near-term earnings growth." This suggests potential upside, especially considering the company's robust revenue growth and improving profitability.
For investors seeking a more comprehensive analysis, InvestingPro offers 11 additional tips for Amazon, providing a deeper understanding of the company's financial health and market position.
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