On Thursday, UBS maintained its buy rating on Amazon.com (NASDAQ:AMZN) shares and increased the price target to $215 from $198. The firm's analyst underscored a shift in investor focus from primarily Amazon Web Services (AWS) to the company's overall franchise revenue and operating income. This change in perspective is due to a rebound in growth following a slump in the second and third quarters of 2023.
The analyst highlighted expectations for Amazon's first-quarter 2024 revenue to be at the upper end of the company's guidance range, which is $143.5 billion. Operating income is projected to be between $13 billion and $13.5 billion, with AWS growth anticipated to be between 15-16%. Additionally, capital expenditures for 2024 are expected to increase, with e-commerce segment spending projected at $31.2 billion, a 9% year-over-year increase, and AWS capital expenditures at $30.6 billion, marking a 24% rise from the previous year.
The report released by UBS includes a new model and recalibrated estimates, reflecting the updated outlook on Amazon's financial performance. The firm also noted that the first quarter of 2024 has brought a broader analysis of Amazon's financial health, moving beyond the narrow focus on AWS, which had been the primary concern for investors in the past.
Looking ahead, UBS anticipates that 2024 will be a pivotal year for Amazon as the overhangs that have previously affected the stock are expected to lift. This is projected to pave the way for Amazon shares to continue their upward trajectory. The analyst's optimistic outlook is based on the comprehensive financial model and the expected resolution of factors that have been weighing on the company's stock performance.
InvestingPro Insights
With UBS maintaining a buy rating on Amazon.com and raising the price target, investors are keenly watching the company's performance metrics. Amazon is trading at a high earnings multiple, with a P/E Ratio of 58.03 and an adjusted P/E Ratio for the last twelve months as of Q4 2023 at 60.29. This reflects the market's high expectations for the company's future earnings growth. Despite these high valuation multiples, Amazon remains a prominent player in the Broadline Retail industry, with a substantial return over the last year, as indicated by the 72.17% one-year price total return.
Amazon's financial health is further evidenced by its solid revenue growth, with the last twelve months as of Q4 2023 showing an 11.83% increase, and a quarterly revenue growth for Q4 2023 at 13.91%. The gross profit margin stands at a robust 46.98%, demonstrating the company's ability to maintain profitability amidst competitive pressures. Furthermore, with an operating income of 36.85 billion USD and an operating income margin of 6.41%, Amazon's operations remain efficient and profitable.
For those considering investing in Amazon, leveraging the insights from InvestingPro could provide a deeper understanding of the company's valuation and performance. There are additional InvestingPro Tips available that can help investors make informed decisions, including the company's moderate level of debt and its strong performance over the last decade. Use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, and gain access to these valuable insights.
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