Amazon stock gains a new high street price target

Amazon (NASDAQ:AMZN) stocks ended last week with a bang, driven by strong 3rd quarter results. The company beat expectations on both the top and bottom lines, and while Q4 revenue guidance came in just below consensus, investors turned a blind eye to that miss and focused on a bright spot — operating income expectations beat the Street’s estimate by 4%, with margins up by approx. 40 basis points.

Scanning the print, JMP’s Nicholas Jones, an analyst ranked in the top 2% of Wall Street stock pros, saw plenty to be optimistic about and thinks the stock is set for several strong days ahead.

“Overall,” said the 5-star analyst, “we are positive on AMZN’s results and guidance, and we continue to believe that AMZN is the stock to own in e-commerce due to its broad range of non -discretionary goods, its large and growing advertising business and AWS’ exposure to artificial intelligence.”

For the analyst, Amazon is hitting all the right notes across the different parts of its business. Although management noted that customers remain cost-conscious in the retail segment, the company said it sees “favorable trends” in everyday essentials, with customers making larger purchases and shopping more frequently. Looking ahead, by improving delivery speeds, reducing service costs and improving packaging processes, the company plans to concentrate on “driving efficiency” in its retail operations. Management also sees additional opportunities to leverage robotics and automation to further boost their fulfillment network.

Meanwhile, AI demand continues to drive “strong AWS trends,” with AI accounting for multibillion-dollar annual revenue and “growing by triple digits.” Over the past 18 months, Amazon has launched nearly twice as many machine learning and genAI capabilities as all other major cloud providers combined.

Furthermore, the continued expansion of AI at AWS over time is expected to “drive operating margin improvement.” As Microsoft also noted for its cloud business, demand for AWS is outstripping supply, and the company believes increased capacity could lead to accelerated growth, although chips “remain a choke point.”

In summary, Jones said, “We continue to like AMZN’s robust performance across its business segments, exposure to generative AI spending, and continued strong performance in its advertising business.”

In fact, such is Jones’ conviction that he has raised his price target from the previous $265 to a Street-high of $285, suggesting that Amazon shares will gain ~46% over the next 12 months. Needless to add, Jones’ rating remains an Outperform (ie Buy). (To see Jones’ track record, click here)

Jones is not alone in his optimism. Wall Street analysts overwhelmingly support the stock with 45 buys against just one hold, giving AMZN a consensus Strong Buy rating. The average price target is $236.20 and gives a one-year return of ~21%. (See AMZN Stock Outlook)

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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.