On Wednesday, BMO Capital Markets adjusted its outlook on Amazon.com Inc (NASDAQ:AMZN), raising the stock price target to $220 from the previous $215 while maintaining an Outperform rating. The firm's analysis points to several factors that support a positive view on the technology giant's stock.
The analyst from BMO Capital highlighted the accelerating growth trajectory of Amazon Web Services (AWS), noting the influence of general artificial intelligence workloads and the increased pace of cloud migration from on-premises infrastructure as key drivers. This expected growth in AWS is seen as a significant factor for the company's performance in the upcoming quarters.
Further supporting the positive outlook, BMO Capital anticipates Amazon will sustain attractive double-digit Gross Merchandise Volume (GMV) growth through at least 2025, accompanied by improving margins. The firm believes that the benefits of regionalization, which refers to the strategic distribution and localization of services, will continue to contribute to margin improvement.
Another potential revenue stream identified by the analyst is Prime Video advertising dollars, which are viewed as an emerging opportunity for Amazon. As the company's streaming service gains traction, the addition of advertising could represent a new source of income.
Capital expenditures (CAPEX) forecasts for AWS have also been revised upwards, aligning with trends observed among other large cloud service providers, often referred to as hyperscalers. BMO Capital now projects that AWS's CAPEX for 2024 and 2025 will increase to $43 billion and $48 billion, respectively, up from the previous forecasts of $40 billion and $45 billion.
The revised stock price target of $220 reflects the analyst's confidence in Amazon's growth prospects and strategic investments, particularly within its AWS segment and potential advertising revenue from Prime Video.
InvestingPro Insights
As BMO Capital Markets updates its stance on Amazon.com Inc (NASDAQ:AMZN), real-time data from InvestingPro further illuminates the company's financial landscape. Amazon's market capitalization stands at a robust $1.82 trillion, underscoring its massive presence in the market.
Despite trading at a high earnings multiple with a P/E ratio of 60.88, the company's prominence in the Broadline Retail industry cannot be overstated. This is further reflected in its significant revenue growth, with the last twelve months as of Q4 2023 showing an 11.83% increase, totaling $574.78 billion.
InvestingPro Tips suggest that Amazon's high return over the last year and the last decade are indicative of its strong market performance. Analysts also predict profitability for the company this year, which aligns with the positive sentiment from BMO Capital.
For those seeking to delve deeper into Amazon's financial metrics and gain more insights, there are 11 additional InvestingPro Tips available, which can be explored at https://www.investing.com/pro/AMZN. Interested readers can also take advantage of a special offer using coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription at InvestingPro.
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