Amazon's Price Target Boosted to $265: BMO Capital Sees Strong Growth Ahead

Amazon.com, Inc. (AMZN) has received a significant boost in its price target from BMO Capital, which raised its estimate to $265 from $236. This revision reflects the firm's optimism about Amazon's robust outlook for Amazon Web Services (AWS) and continued growth in retail and advertising. Let's delve into the key factors driving this price target increase and explore what it means for Amazon's current and future prospects.



AWS Growth Acceleration
BMO Capital anticipates AWS growth to accelerate in 2025, projecting a 20% increase compared to the prior estimate of 17%. This acceleration is driven by the potential for significant cloud adoption among AWS's largest customers, many of whom currently have only 10-40% of their workloads in the cloud. AWS CEO Matt Garman suggested there is visibility for this figure to rise to 70-80%, driven by ongoing innovation. BMO Capital's channel checks indicate AWS growth for 2025 could approach the low 20% range, prompting an increase in their growth estimates for 2025 and 2026 to 20% and 17%, respectively.

Retail Growth
Amazon's Same-Day/Next-Day delivery services are expected to boost frequency growth and free cash flow potential. With Same-Day/Next-Day volume up 30% year-over-year through July, Amazon is on pace to deliver +10B items at unmatched speed. This growth in retail is expected to contribute to Amazon's overall growth in 2025 and 2026.

Advertising Revenue Growth
BMO Capital raised its ad revenue estimates following the successful launch of Sponsored TV, projecting $63.6 billion in 2025 and $70.3 billion in 2026. This growth in advertising is expected to contribute to Amazon's overall growth in 2025 and 2026.



Investment in Technology Infrastructure
Amazon expects to increase its capital expenditure this year, with the majority of the investment going toward technology infrastructure to support AI demand. This investment is expected to drive growth in both AWS and Amazon's AI business, which is growing three times faster than AWS did at a similar stage of development. CEO Andy Jassy highlighted the potential of AI to drive growth, stating that Amazon's AI business is growing three times faster than AWS did at a similar stage in its development.



Amazon's Strong Financial Performance and Market Position
Amazon's strong financial performance and market position contribute to the expectation of significant growth in 2025 and 2026. The company's diverse revenue streams, including AWS, retail, and advertising, provide a solid foundation for continued growth.



In conclusion, BMO Capital's price target revision for Amazon reflects the firm's optimism about the company's robust outlook for AWS and continued growth in retail and advertising. With strong financial performance and a solid market position, Amazon is well-positioned for significant growth in 2025 and 2026. As an investor, keeping an eye on Amazon's progress and considering its stock as a potential addition to your portfolio may be a wise move.