Wall Street analysts defended the bull thesis on Amazon (AMZN) after the company’s update on capex spending sent shares spiraling lower.
Bank of America analyst Justin Post said the returns on capex spending are now the top driver of the stock. “While the capacity ramp will add margin volatility in future quarters, we think this capacity will be fully utilized as part of the AI business transformation across industries and will help Amazon maintain competitiveness in a very attractive sector,” he noted. BofA has a Buy rating on Amazon (AMZN) and a lowered price objective of $275.
Morgan Stanley analyst Brian Nowak highlighted that AWS is accelerating with even faster growth ahead and the retail business is delivering with improving efficiency. “Yes, AMZN is investing (AWS, Retail, LEO), but it has a track record of showing ROIC, which leaves us bullish on this underappreciated GenAI winner across,” wrote Nowak. Morgan Stanley kept its Overweight rating and $300 price target on Amazon (AMZN) in place.
RBC Capital analyst Brad Erickson was also positive on the upside for Amazon (AMZN) after an earnings print that was said to be solid on the surface with AWS accelerating. “It remains the most underappreciated mega-cap in our space, where we maintain high conviction in AI leadership materializing over time amidst rising ROIC justification. Raising revs on AWS, lowering EBIT/EPS slightly on Leo costs, and lowering FCF on Capex,” he updated. The firm reiterated its Outperform rating on AMZN and $300 price target.
Wedbush Securities analyst Dan Ives characterized Amazon’s (AMZN) revenue guidance as encouraging. “We expect there is some conservatism embedded in management’s outlook, as the company has outperformed the high end of its guide for several consecutive quarters,” he added. Ives and his team think the thesis on Amazon (AMZN) remains intact, despite the high level of capex spending. “We continue to see multiple levers of sustainable margin improvement, including fulfillment optimization and the structural mix shift towards higher margin AWS and advertising revenues,” added Ives. Wedbush lowered its price target on Outperform-rated Amazon (AMZN) to $300.
Seeking Alpha analysts are divided on Amazon, with new post-earnings assessments including Buy, Sell, and Hold ratings.
Shares of Amazon (AMZN) pared their post-earnings loss in premarket trading on Friday and were down 7.3% at 6:47 a.m.