On Friday, Piper Sandler adjusted its outlook on Amazon.com Inc (NASDAQ:AMZN) by increasing the price target to $225 from the previous $215 while maintaining an Overweight rating on the shares. The firm's assessment followed Amazon's third-quarter results, which exceeded expectations.
The e-commerce giant reported a third-quarter EBIT (Earnings Before Interest and Taxes) of $17.4 billion, surpassing the high end of their guidance at $15 billion. Additionally, the guidance for the fourth quarter of 2024 was also viewed positively.
In the analysis, the firm acknowledged that Amazon's cloud computing arm, AWS, did not continue its growth acceleration, and advertising growth fell short of estimates. Despite these weaker segments, the analyst emphasized the ongoing margin narrative, suggesting that Amazon's profit margins are expected to be a positive talking point moving forward.
The valuation of Amazon was described as compelling, with the stock trading at approximately 13 times next twelve months (NTM) EBITDA, which is slightly below the average dating back to 2023. While the firm lowered its EBIT forecasts for 2025 and 2026 to adopt a more conservative stance, it extended its discounted cash flow (DCF) model by one year, leading to the updated price target.
The report concluded with a reiteration of the Overweight rating, indicating confidence in Amazon's stock performance and potential for growth. The firm's stance reflects a positive outlook on Amazon's ability to maintain its margin trajectory and deliver value to shareholders.
In other recent news, Amazon.com's third-quarter financial performance exceeded analyst projections, with revenues reported at $159 billion, an 11% increase year-over-year. RBC Capital Markets, Bernstein, and Goldman Sachs have all revised their outlook on the company, raising their price targets to $225, $235, and $240 respectively, reflecting their confidence in Amazon's future growth.
Despite slower growth in Amazon Web Services (AWS), Bernstein anticipates an acceleration in AWS revenue as the year concludes.
Amazon has also been expanding its selection of everyday essentials to compete with low-cost international rivals such as Temu and Shein, leading to customers shopping more frequently and adding more lower-priced items to their purchases. This strategy aligns with the company's efforts to counteract pressure on its average selling prices.
These recent developments in Amazon's financial and business activities underscore the strength of its core business and its potential for further margin expansion. As the company continues to solidify its presence as a leader in online retail and cloud computing services, analysts remain optimistic about its financial health and market position.
InvestingPro Insights
To complement Piper Sandler's analysis, recent data from InvestingPro offers additional context on Amazon's financial position. The company's market capitalization stands at an impressive $1.96 trillion, reflecting its dominant position in the e-commerce and cloud computing sectors. Amazon's revenue for the last twelve months reached $604.33 billion, with a notable growth rate of 12.32%, aligning with the firm's positive outlook on the company's performance.
InvestingPro Tips highlight Amazon's strong market presence, noting it as a "Prominent player in the Broadline Retail industry." This reinforces Piper Sandler's confidence in the company's competitive position. Additionally, the tip indicating that Amazon is "Trading at a low P/E ratio relative to near-term earnings growth" supports the firm's view of Amazon's compelling valuation.
For investors seeking a deeper understanding of Amazon's financial health and growth prospects, InvestingPro offers 11 additional tips, providing a comprehensive analysis of the company's market position and potential.
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