📊 Q3 Earnings are here! Plan ahead with key data on upcoming stock reports - all in 1 placeSee list

Pivotal Research begins Amazon coverage, sees strong growth with $260 PT

Published 10/11/2024, 06:58 PM
© Reuters.
AMZN
-

Investing.com -- Pivotal Research Group has initiated coverage of Amazon (NASDAQ:AMZN) with a "buy" rating, citing the company’s strong organic growth potential and its robust position across several sectors.

In a note dated Friday, analysts at Pivotal flagged Amazon’s broad expansion opportunities, particularly driven by its cloud services division, Amazon Web Services, which they predict will grow from 17% of total revenue in 2024 to over 35% within the next five years.

This substantial growth is expected to be fueled by the increasing adoption of cloud technologies, particularly as artificial intelligence capabilities continue to expand across industries.

Beyond cloud services, Pivotal pointed out that Amazon has vast potential to grow its e-commerce and retail businesses by leveraging its infrastructure to expand into new markets, especially in sectors like grocery and pharmacy. 

The company’s international footprint is also expected to expand, along with improvements in delivery speeds and fulfillment operations. 

Amazon's advertising business, which is already the third-largest globally, is projected to capture more market share, further diversifying its revenue streams.

Pivotal also noted Amazon’s ability to develop new revenue channels through technological advancements like robotics, AI, and autonomous vehicles. 

Analysts at Pivotal argue that these emerging technologies will not only support operational efficiency but could also lead to margin expansion over the next five years, driving operating margins up from the current 10% to approximately 20% by 2029.

Key to Amazon’s value proposition, as per Pivotal, is its ability to capitalize on scale, efficiency, and higher-margin businesses like AWS and advertising. 

These factors, combined with potential cost reductions through AI and automation, place Amazon in a strong position to continue its dominance in the technology sector.

Despite the bullish outlook, Pivotal also warned of several risks that could affect Amazon’s trajectory. These include regulatory pressures, as the company faces potential antitrust actions, and concerns that Amazon may lag behind competitors in AI development. 

Additionally, the Kuiper satellite project, aimed at providing global internet coverage, poses a financial risk, although it is seen as a long-term bet that could enhance Amazon’s logistics and retail capabilities.

Pivotal values Amazon using a discounted cash flow model, forecasting a 30% annual growth in free cash flow per share, supported by strong growth in AWS and advertising. 

The brokerage has set a year-end 2025 price target of $260 for Amazon’s stock, reflecting confidence in the company’s ability to sustain its market leadership while expanding into new high-growth areas​.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.