Amazon Stock Price Target Boosted: A Favorite Among Mega-Caps

Amazon.com (AMZN) has received a price target hike from an analyst, reflecting strong consumer spending and positive signs in the company's cloud business. Truist analyst Youssef Squali raised the firm's price target on Amazon stock to 265 from 230, reiterating a 'buy' rating in a note to clients. Squali highlighted that North American revenue is tracking virtually to consensus estimates quarter-to-date, reflecting a resilient consumer, sustained growth in ad revenue, faster growth at AWS, and higher operating margins year-over-year.


Amazon shares were slightly lower early Monday, working towards a potential flat base buy point. The stock has formed a consolidation pattern with a 201.20 buy point, according to MarketSurge. Monday marked the final day of Amazon's third quarter, with the company expected to report Q3 earnings late in October. Analysts project, on average, that Amazon's revenue will rise 9.9% to $157.2 billion.


Squali noted that Truist Card data indicates Amazon's U.S. revenue is tracking in line with current consensus of $95.4 billion for the third quarter. This gives the analyst confidence that Amazon is on track to meet overall consensus revenue estimates. The 265 price target for Amazon stock reflects Truist's estimates for Amazon's fiscal year 2025 value, compared to its fiscal year 2024 target of 230.

Amazon is Truist's favorite mega-cap stock, as it continues to gain share of global e-commerce and improve its value proposition to both merchants and consumers. The company is also seen as one of the best ways to play cloud, AI, digital ads, and global logistics. Despite concerns about consumers trading down on price and impacting Amazon's retail margins, Truist analysts expect Amazon's capital expenditures to remain elevated as it builds up its AI-related infrastructure.


Amazon's Project Kuiper satellite internet business could also weigh on the company's North American margins as it scales up satellite launches. However, Squali believes that the effort could pay dividends over the medium to long term. Amazon stock is up more than 20% this year after an 81% rally in 2023, reflecting investors' confidence in the company's growth prospects and strategic initiatives.