On Wednesday, Loop Capital adjusted its financial outlook for Amazon.com (NASDAQ:AMZN) shares, increasing the price target to $275 from the previous $225. The firm maintained a Buy rating on the stock, following Amazon's impressive third-quarter performance which exceeded expectations.
The update comes after Amazon reported a solid beat-and-raise for its third-quarter results, prompting Loop Capital to revise its forecasts and valuation approach based on projections up to the year 2026. The firm's EBITDA estimate for 2025 has been lifted by approximately 9%, and it anticipates a 15% growth in EBITDA for 2026.
Loop Capital emphasized the significant potential of Amazon Web Services (AWS) in the burgeoning AI sector, noting that AI-related revenue is accelerating at a rate three times faster than core AWS services during a similar phase of development. This growth is seen as a clear indicator of the vast opportunities available for AWS in AI.
The analyst also pointed out that while the cloud business's strengths are well recognized by investors, Amazon's retail segment possesses greater earnings capabilities than what is currently acknowledged by the market. This underappreciated aspect of Amazon's business could indicate further upside for the company's financials.
By rolling forward the valuation framework to incorporate the 2026 estimates, Loop Capital has expressed confidence in Amazon's future performance, underlining the company's robust fundamentals and the promising trajectory of its AI and cloud divisions. The revised price target to $275 reflects this optimistic assessment of Amazon's growth prospects and earnings potential.
In other recent news, the United States has urged Italy to eliminate its digital services tax, which primarily impacts American tech firms such as Meta Platforms Inc (NASDAQ:META), Google (NASDAQ:GOOGL), and Amazon. The Italian government is considering revisions to broaden the tax's scope in its 2025 budget.
Meanwhile, Perplexity, a California-based AI startup, is raising $500 million in funding, which would value the company at $9 billion. Despite facing a lawsuit over copyright infringement, the firm continues to attract notable investors including Amazon founder Jeff Bezos.
In a recent all-hands meeting, Amazon CEO Andy Jassy addressed concerns over the company's decision to implement a five-day in-office work week starting next year. Despite employee pushback, Jassy maintains that the policy change is meant to reinforce company culture.
Elsewhere, Physical Intelligence, an AI startup focused on robotics, secured $400 million in funding from investors including Jeff Bezos and venture capital firms Thrive Capital and Lux Capital.
Investment firm Stonepeak is reportedly close to finalizing a $3.1 billion deal to acquire Air Transport Services (NASDAQ:ATSG) Group, a leading aircraft leasing and cargo service provider. The acquisition comes as demand for air cargo transportation increases due to the rise in online shopping. These are just some of the recent developments in the global business landscape.
InvestingPro Insights
Amazon's strong performance and growth potential highlighted by Loop Capital are further supported by recent data from InvestingPro. The company's market capitalization stands at an impressive $2.1 trillion, reflecting its dominant position in the market. Amazon's revenue growth remains robust at 11.93% over the last twelve months, aligning with Loop Capital's positive outlook on the company's earnings potential.
InvestingPro Tips indicate that Amazon is trading at a low P/E ratio relative to its near-term earnings growth, with a PEG ratio of 0.29. This suggests that the stock may be undervalued considering its growth prospects, which supports Loop Capital's bullish stance. Additionally, Amazon's strong return over the last three months, with a price total return of 23.2%, underscores the market's confidence in the company's recent performance and future outlook.
It's worth noting that InvestingPro offers 14 additional tips for Amazon, providing investors with a comprehensive analysis of the company's financial health and market position. These insights can be valuable for those looking to make informed investment decisions based on detailed financial metrics and expert analysis.
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