Macro-related pressures have impacted Amazon’s (NASDAQ:AMZN) e-commerce and cloud computing businesses in the recent quarters. Nonetheless, AMZN shares have risen more than 15% in the past month and are up nearly 47% year-to-date. Despite macroeconomic challenges, Wall Street analysts remain bullish on Amazon and see further upside in the stock.
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Wall Street Bullish on AMZN Stock
Amazon reported market-beating first-quarter results, with revenue growing 9% to $127.4 billion. However, investors are concerned about the continued slowdown in the Amazon Web Services (AWS) cloud business, which is a higher margin unit compared to the company’s e-commerce division.
Management said that enterprises continue to optimize their cloud spending in response to tough economic conditions. The company expects the impact of subdued spending to extend into the second quarter, with April revenue growth rate estimated to be about 500 basis points lower than Q1.
Nevertheless, most analysts covering Amazon remain optimistic about the long-term prospects of AWS due to the continued transition to the cloud. They are also bullish on AMZN due to its e-commerce dominance and the rapidly growing advertising business.
This week, six analysts reiterated a Buy rating on Amazon stock, including UBS (UBS) analyst Lloyd Walmsley, who raised his price target for AMZN to $150 from $130. Walmsley expects Amazon shares to move higher as AWS reaccelerates in 4Q, with Bedrock gaining traction. The recently-launched Bedrock is a service for building and scaling generative artificial intelligence (AI) applications.
Bernstein Analyst’s Interesting Take on AMZN
Interestingly, in a research note this week, which Bernstein analyst Mark Shmulik called an “open letter” to Amazon’s management, he remarked that while AMZN is his best investment idea in the internet space, the company needs significant “self-help” to put an end to investors concerns about the current strategy and investor communications. The analyst thinks that if Amazon takes the right steps, the stock might spike to the $180 to $200 range.
Shmulik contends that Amazon is pursuing too many ideas, with weaker ideas taking away the company’s resources and focus from the truly disruptive ones. In particular, he thinks that the company should “divest, seek outside funding or trim spend” in its healthcare business and low Earth orbit satellite venture called Project Kuiper.
The analyst is also skeptical about Amazon’s efforts to expand in certain international markets like Brazil, where the company is struggling to grow its market share. Overall, Shmulik sees bright prospects for Amazon if it exits non-core areas and focuses on initiatives like Buy With Prime. Shmulik reiterated a Buy rating on Amazon with a price target of $140.
Is Amazon Stock a Buy or Sell?
Of the 29 Top Wall Street Analysts covering Amazon, 28 have a Buy rating, while only one analyst has a Hold recommendation. The average price target of $138.33 implies 12.1% upside. Shares have risen 47% year-to-date.
Conclusion
Despite the impact of macro pressures on Amazon’s e-commerce and AWS businesses, Wall Street analysts remain optimistic about the company’s long-term potential and see further upside in the stock. As per TipRanks’ Smart Score System, Amazon scores an eight out of 10, implying that the stock is capable of outperforming the broader market over the long term.
