Amazon Analysts See Growth Ahead With AWS In 'Early Innings Of A Big AI Cycle,' Advertising Segment Fast-Growing 'Hidden Asset'

Amazon.com Inc (NASDAQ:AMZN) analysts see strength in AWS, retail and advertising after the company’s third-quarter results.

The Amazon Analysts: Bank of America analyst Justin Post reiterated a Buy rating on Amazon and raised the price target from $210 to $230.

Wedbush analyst Scott Devitt maintained an Outperform rating and raised the price target from $225 to $250.

Goldman Sachs analyst Eric Sheridan maintained a Buy rating and raised the price target from $230 to $240.

Needham analyst Laura Martin maintained a Buy rating with a $210 price target.

RBC Capital Markets analyst Brad Erickson maintained an Outperform rating and raised the price target from $215 to $225.

BMO Capital Markets analyst Brian Pitz reiterated an Outperform rating and raised the price target from $230 to $236.

Truist analyst Youssef Squali maintained a Buy rating and raised the price target from $265 to $270.

Telsey analyst Joseph Feldman maintained an Outperform rating and raised the price target from $215 to $235.

Benchmark analyst Daniel Kurnos maintained a Buy rating and raised the price target from $200 to $215.

Scotiabank analyst Nat Schindler had a Sector Perform rating and raised the price target from $245 to $246.

JMP Securities analyst Nicholas Jones maintained a Market Outperform rating and raised the price target from $265 to $285.

Oppenheimer analyst Jason Helfstein maintained an Outperform rating and raised the price target from $220 to $230.

Piper Sandler analyst Tomas Champion reiterated an Overweight rating and raised the price target from $215 to $225.

Analysts on Amazon AWS: Growth for AWS was 19% year-over-year, which could be stable compared to past quarters, analyst estimates and peers like Google, Bank of America’s Post said in a new investor note.

The analyst said AWS could still be "in the early innings of a big AI cycle."

"We think AWS' $1.2bn in q/q revenue dollar growth will compare well to competitors," Post said.

Wedbush’s Devitt highlighted AWS's AI business being a multi-billion dollar run rate segment and growing triple-digits year-over-year in a new investor note.

"We are encouraged by commentary in the quarter indicating healthy cloud trends, with an ongoing reacceleration in AWS growth for the fourth consecutive quarter bolstered by rising demand for new AI offerings," Devitt said.

Analysts on North America, Amazon Prime: The third quarter saw Prime members grow thanks to the Prime Day Event held in July, Post said.

The analyst said Amazon is seeing strength in its North American retail segment as it improves product offerings, especially on lower-cost products.

"With strength in categories like everyday essentials, Amazon is seeing bigger baskets," Post added.

Amazon's efforts on better product selection and lower priced items could be helping the company gain "profitable market share," Telsey’s Feldman said in a new investor note.

"The healthy Retail results reflect gains from an expanded product assortment, with a greater focus on every day and value items," Feldman said.

The analyst said Amazon's focus on grocery and pharmacy could be helping and continue to help with the retail segment.

"Amazon should continue to gain market share by leveraging its sticky Prime member base."

Analysts on International Segment: Revenue of $35.9 billion and revenue growth of 12% year-over-year made the international segment "particularly strong" in the third quarter, Post said.

The analyst said strength in established countries like Germany and the U.K. are seeing positive trends.

Amazon aiming for the same margins in international markets as its North America segment was "a positive new disclosure," Post added.

Analysts on Advertising: Amazon's advertising segment could be the company's "fastest-growing hidden asset," Needham’s Martin said in a new investor note.

Advertising revenue was $14.3 billion in the third quarter, up 19% year-over-year.

"AMZN advertising is one of the fastest growing revenue and value creation engines in the AMZN portfolio, we believe," Martin said.

The analyst estimates operating profit margins of 40% for Amazon advertising in the third quarter.

BMO Capital Market’s Pitz calls the advertising growth in the third quarter attractive and sees upside in future quarters thanks to Amazon Prime Video and sports content.

"The recent launch of AI Bidding Tools increases the likelihood of continued adoption," Pitz said.

The analyst said Amazon Ads could approach 10% of gross merchandise volume over time.

The Prime Video ad tier entered a first advertising season in October, which makes the advertising sector one to watch going forward, Truist’s Squali said.

"We believe the Prime Video Ad Tier can represent an MSD% of Amazon's total ad revenue annually in FY25," Squali said.

The analyst said Amazon should see "above market growth" for its advertising business going forward.

AMZN Price Action: Amazon stock is up 6.07% to $197.79 on Friday versus a 52-week trading range of $136.47 to $201.20. Amazon stock is up 33% year-to-date in 2024.

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