On Friday, Maxim Group adjusted its outlook on Amazon.com (NASDAQ:AMZN) shares, raising the price target to $260 from the previous $251 while maintaining a Buy rating on the shares. The firm's decision is based on expectations of revenue growth in higher-margin services and efficient expense management.
The analyst at Maxim Group provided a rationale for the increased price target, stating that the new figure is derived from applying a 17.5x multiple to the projected adjusted EBITDA for the year 2025, which is now estimated to be $158 billion, up from the prior forecast of $152 billion. This adjustment reflects a positive outlook on the company's financial growth.
At present, Amazon's shares are trading at an enterprise value to EBITDA (EV/EBITDA) multiple of 13.0x based on the 2025 projections. This valuation is notably below the average multiple of 32.1x for its big-tech peers. The valuation gap suggests room for growth in Amazon's stock price as it moves closer to the industry average.
The analyst highlighted the potential for Amazon to expand its multiple due to the anticipated growth in higher-margin services revenue. This area of the business is seen as a key driver for profit improvement and is expected to contribute significantly to the company's financial performance.
In addition to revenue growth prospects, Maxim Group anticipates that Amazon's aggressive expense management strategies will also play a crucial role in enhancing the company's profitability. Effective cost control measures are essential for improving the bottom line and can lead to a re-rating of the stock by the market.
In other recent news, Amazon.com Inc (NASDAQ:AMZN). reported significant third-quarter earnings and revenue results, with an 11% year-over-year increase to $159 billion. The company's operating income surpassed expectations, reaching $17.4 billion. Amazon Web Services (AWS), the company's cloud computing division, reported a year-over-year growth of 19%. Following these robust results, several financial firms adjusted their outlook on Amazon.
Leading firms such as Oppenheimer, Telsey Advisory Group, Seaport Global Securities, Deutsche Bank, and Evercore ISI increased their price targets for Amazon. These adjustments reflect a positive outlook on Amazon's continued financial growth and operational efficiency. However, these are projections from analysts, and actual results may vary.
InvestingPro Insights
Recent data from InvestingPro adds weight to Maxim Group's bullish outlook on Amazon. The company's revenue growth remains strong, with a 12.32% increase over the last twelve months as of Q2 2024, reaching $604.33 billion. This aligns with the analyst's expectations of continued growth in higher-margin services.
Amazon's profitability metrics are also impressive, with an adjusted operating income of $54.38 billion and an EBITDA of $104.05 billion for the same period. The EBITDA growth of 61.87% is particularly noteworthy, supporting Maxim Group's projection of increased EBITDA for 2025.
InvestingPro Tips highlight Amazon's position as a "Prominent player in the Broadline Retail industry" and its ability to operate with "a moderate level of debt," which could contribute to its financial stability and growth potential. Additionally, the tip that "Analysts predict the company will be profitable this year" reinforces the positive outlook on Amazon's financial performance.
For investors seeking a deeper understanding of Amazon's potential, InvestingPro offers 11 additional tips, providing a comprehensive analysis of the company's financial health and market position.
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