It goes without saying that the major indices have risen significantly since the beginning of the year due to mega caps. Tech giants have played a big role in those profits, and all have experienced significant increases. One notable example is Amazon(NASDAQ: AMZN)e-commerce tycoon’s stock price has risen by up to 60% since the beginning of 2023.
With Amazon’s stock soaring, is it time to evaluate your position? No, this seems to be the reaction of his five-star analyst at Evercore, Mark Mahaney. He believes now is the time to “go for AMZN” ahead of the company’s second quarter results on July 27th.
Looking ahead to print, Mahaney expects second-quarter sales of $131.6 billion, which is broadly in line with the market and more midpoint than Amazon’s guidance of $127 billion to $133 billion. It’s expensive. Similarly, Mahaney forecasts GAAP operating profit of $4.8 billion, which is in line with consensus and above the guide’s midpoint of $2 billion to $5.5 billion.
It’s worth noting that Amazon has beaten the upper bound of its operating profit guidance in 20 of the last 29 quarters. But over the past 12-15 months, the company has faced unusually severe cost pressures, and as a result, this achievement has only been achieved in his four of the last eight quarters. Nonetheless, Mahaney believes those pressures are now starting to ease.
Mahaney calls 2023 a “growth trough, margin trough, multi-year trough,” and calls it the “triple trough thesis.” He believes things will improve from this point on. “The potential for accelerated revenue growth and higher margins in Amazon’s retail and cloud divisions heading into 2024 is clear,” said a top analyst. “We are particularly interested in the potential for increased AI workloads to significantly increase demand for his solutions in cloud computing and storage, where AWS is a strong market leader.”
Another term Evercore uses, called “delivery elasticity,” refers to the company’s concept of “increased demand and revenue generated by Amazon’s Prime delivery speed acceleration.” This concept argues that Prime’s ever-increasing adoption rate is irrelevant to Prime’s cancellation complexity. What that means is that this development is expected to increase revenue.
Evercore’s findings show that same-day delivery usage is trending upward, especially among households that subscribe to Amazon’s Prime Same Day. These households spend significantly more than other households on Amazon. Mahaney estimates that for every 1% increase in Prime Same Day penetration, he could generate up to $1.3 billion in additional revenue and he could generate an increase in operating income of $130 million. increase.
Overall, Mahaney rates Amazon stock as an outperformer (i.e. buy), but his $150 price target suggests the stock has room to grow another 12% from its current level. . (To see Mahaney’s achievements, click here)
Other analysts generally have the same perception. The breakdown of AMZN’s ‘strong buy’ consensus rating is 38 ‘buys’ and he has 1 ‘hold’. The average price target is $143.53, with 7.5% upside. (Check Amazon’s Stock Prediction on TipRank)
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Disclaimer: The opinions expressed in this article are those of the featured analyst only. Content is used for informational purposes only. It is very important to do your own analysis before making any investment.