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Amazon is expected to report its first-quarter results after the closing bell on Tuesday.
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Investors have been keeping an eye on the company’s AI initiatives and earnings metrics.
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The company could be a “top pick” in the e-commerce space, Goldman Sachs said.
Amazon is set to report earnings after the closing bell on Tuesday, and Wall Street has been eyeing some key details ahead of the conference call.
The company has had a strong performance so far in 2024, with shares up 20%. Investors are generally bullish on mega-cap tech stocks, with Amazon among the companies at the forefront of the artificial intelligence arms race.
The company is developing custom generative AI chips that could be a big catalyst for its stock in the coming years, Needham strategists said in a recent note.
“This is a unique strategic position and with winner-take-most economics in digital markets, we are optimistic that AMZN will be one of GenAI’s two to three winners,” the statement said.
Investors are also looking for strength in key areas of the company, including Amazon Web Services and advertising revenue. These areas could face challenges as consumer spending slows.
Here’s what Wall Street expects from Amazon’s upcoming earnings report:
Bank of America: Top Stock Drivers in the Game
BofA expects healthy growth for the online retailer in the last quarter. The bank pointed to Amazon CEO Andy Jassy’s letter to shareholders, which suggested positive progress in retail margins, AWS and advertising revenue – all “key stock drivers” for the company, analysts said in a note.
“We expect to outperform Q1, and while the Q2 lineup presents some unusual Q/Q hurdles, we expect the positive Q1 metrics and conference call comments to be constructive and consistent with the latest shareholder letter… Given rising retail margins (robust ad growth with a likely Prime boost in Q1) and expected AWS acceleration, we believe the stock is still poised for multiple expansion in 2024 is,” analysts wrote last week.
BofA analysts reiterated their Buy rating and $204 price target on the stock, implying a 13% upside from current levels.
Wells Fargo: Healthy trends for the first quarter
According to analysts at Wells Fargo, Amazon appears to be well on its way, especially considering that a change in the fee structure for its Fulfillment by Amazon program could result in up to $1.2 billion in additional operating income comparison to the previous quarter.
Retail sales are expected to contribute $725 million to incremental operating income for the quarter, while Amazon Web Services is expected to contribute $350 million.
“We assume that enterprise cloud migration revenues were relatively subdued in the first quarter, but there are promises of acceleration in the second half of the year. We expect ’24 to be a year of cyclical recovery, while enterprise AI is likely to be more of a focus in ’25 and ’26,” the bank said in a note.
Analysts have raised their price target on Amazon shares to $217, implying a 20% upside potential.
Goldman Sachs: Top e-commerce pick in the first quarter
Goldman Sachs said it was “cautious” on e-commerce stocks as a number of headwinds built up in the sector. But Amazon is its “top pick” for the first quarter, thanks to robust retail demand and expected growth in AWS and advertising revenue, analysts said in a note.
“Our industry work and the third-party data sources we examined suggest that online consumer spending remains robust in the first quarter of 2024. However, we see a wide spread in results across companies,” the analysts wrote.
The company maintained its Buy rating and $220 price target, implying a 22% upside from the stock’s current levels.
Needham: Top 2-3 “winners” of the AI race
Amazon is expected to perform better on several earnings metrics, Needham analysts predicted, adding that Amazon will be among the top winners in the AI race that is captivating Wall Street.
“We believe cost reductions as well as cloud and advertising revenue growth… will lead to overdelivery of FCF and ROICs, which should lead to valuation multiple expansion,” analysts added.
However, the bank noted that Amazon’s business remains subject to risks, including weak consumer demand and increasing competition.
The company maintained its “buy” rating and $205 price target on Amazon shares, implying a 14% upside from current levels.
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