On Wednesday, Morgan Stanley (NYSE:MS) demonstrated confidence in Amazon.com, Inc. (NASDAQ:AMZN), by increasing the e-commerce giant's stock price target to $220, up from $215. The firm has maintained an Overweight rating on the stock. The adjustment reflects a positive outlook on Amazon's financial performance, particularly noting improvements in cost management and international profitability.
The analyst at Morgan Stanley highlighted that the revision of the stock price target is influenced by a roughly 10% increase in the anticipated earnings before interest and taxes (EBIT) and earnings per share (EPS) for the year 2025. The underlying factors contributing to this optimistic projection include Amazon's disciplined approach to costs and hiring, as well as early improvements in the cost to serve its customers.
Despite the positive adjustments, the analyst pointed out that Amazon's North American retail operations continue to operate at a loss when excluding revenue from advertisements. Still, the firm anticipates further efficiencies related to cost to serve and an acceleration in the performance of Amazon Web Services (AWS), which could drive additional upside to the company's EPS and free cash flow (FCF) in the future.
The updated stock price target of $220 reflects Morgan Stanley's confidence in Amazon's ability to enhance profitability and sustain growth. The Overweight rating indicates the firm's belief that the stock will outperform the average total return of stocks analyzed by the firm over the next 12 to 18 months.
Morgan Stanley's outlook for Amazon is based on the company's strategic measures to tighten cost controls and expand the profitability of its international segments. The emphasis on AWS is also significant, as the cloud computing platform is a major contributor to Amazon's overall financial health and growth trajectory.
InvestingPro Insights
Amazon.com, Inc. (NASDAQ:AMZN) continues to capture the attention of investors and analysts alike. With Morgan Stanley's recent price target increase, it's clear that the e-commerce behemoth is poised for continued growth.
Supporting this sentiment, InvestingPro data indicates that Amazon is trading at a high earnings multiple, with a P/E ratio of 60.88 and an adjusted P/E ratio for the last twelve months as of Q1 2023 at 61.64. This reflects the market's high expectations for the company's future earnings potential.
The company's prominence in the Broadline Retail industry is undeniable, and it has demonstrated a high return over the last year, as evidenced by a year-to-date price total return of 15.18% and a 1-year price total return of 71.48%. Amazon's revenue growth also remains robust, with an 11.83% increase in the last twelve months as of Q1 2023. As for valuation metrics, Amazon's price to book ratio stands at 9.02, indicating a premium market valuation.
For investors looking for more detailed analysis, there are additional InvestingPro Tips available, including insights on Amazon's moderate level of debt and predictions on profitability for the current year. With a total of 11 additional InvestingPro Tips to explore, readers can gain a more comprehensive understanding of Amazon's financial landscape. To access these insights and more, consider using the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription at InvestingPro.
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