Amazon (NASDAQ: AMZN) has received a significant vote of confidence from HSBC, as analyst Christopher Johnen raised the company’s price target to $270, up from $225, while maintaining a “Buy” rating.
The revised target reflects the firm’s confidence in Amazon’s ability to leverage its past investments in artificial intelligence (AI), cloud computing, and advertising to drive profitability and reinforce its competitive moat.
Despite the bullish outlook, Amazon shares closed at $218.46 on January 13, recording a daily decline of 0.22%. On the weekly chart, losses deepened, with the stock down 3.8% over the past five days.
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Amazon’s key growth drivers
Amazon continues to push boundaries in AI and cloud computing, two sectors identified by HSBC analyst Christopher Johnen as critical to the company’s future growth.
The revised target, which suggests a 22% upside, comes as Amazon shows robust financial health and market leadership. With an impressive 11.93% revenue growth and $111.58 billion in EBITDA over the twelve months ending September 30, the tech giant is well-positioned to capitalize on emerging opportunities in its core and expanding business segments.
“We continue to see strong potential for Amazon in 2025, with further validation of our main theme: harvesting the benefits of past investments, demonstrating its business moat, and revealing underlying profitability. We are optimistic about progress in key areas, including AI, cloud, ad revenue growth, and e-commerce margins” – the analyst noted
Amazon’s vision for AI and key partnerships
Amazon’s vision for the next decade is closely tied to artificial intelligence. The company has committed over $100 billion to AI development, with initiatives such as Project Rainier, a supercomputer powered by Trainium chips designed to rival Nvidia (NASDAQ: NVDA) GPUs; and Project Ceiba, a collaboration with Nvidia that integrates more than 20,000 Blackwell GPUs to handle advanced AI workloads.
Adding to its AI advancements, Amazon Ads has launched a generative AI-powered SQL generator for the Amazon Marketing Cloud (AMC). This tool provides advertisers with a natural language interface, enabling them to create SQL queries tailored to their audience’s needs without requiring manual coding, significantly reducing query development time.
Amazon’s partnership with Honda (NYSE: HMC) further highlights its AI ambitions. In collaboration with AWS, Honda is transitioning its vehicles from hardware-based systems to software-defined vehicles (SDVs), aiming to revolutionize the automotive sector with advanced mobility solutions.
E-commerce and advertising: Other pillars of profitability
Amazon’s dominance in e-commerce is also unmatched, holding a 40% market share in the U.S., far ahead of competitors like Walmart (NYSE: WMT), trailing at 7%. Its leadership extends across nearly every product category, providing a consistent revenue stream.
Beyond retail, Amazon’s advertising business has become a vital growth engine, with ad revenue surging 19% year-over-year to $14.3 billion in Q3 2024.
Broader analyst sentiment: Amazon as a ‘top pick’
Johnen’s bullish outlook aligns with other analysts who are optimistic about Amazon’s future. Wolfe Research analyst Shweta Khajuria recently upgraded Amazon’s price target from $250 to $270, naming it a ‘top pick’ for 2025. Khajuria cited automation, rising advertising revenues, and advancements in cloud computing and AI as core drivers of the company’s success.
JPMorgan (NYSE: JPM) echoed these sentiments, noting Amazon’s continuous growth in 2024 despite expectations of a softer year-end performance. Analysts from Jefferies and Bernstein highlighted the company’s ability to expand margins and capitalize on growing demand for cloud computing and AI services.
As Amazon prepares to release its Q4 2024 earnings report, analysts project earnings per share (EPS) of $1.51 on revenue of $191.03 billion, according to data from StockAnalysis. Many analysts, including Johnen, anticipate the company will exceed these estimates, driven by improved profitability and the ability to reap the rewards of its past investments.
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