Amazon Stock Target Raised: BMO Sees Strong AWS Outlook

Amazon.com, Inc. (NASDAQ: AMZN) has received a boost from BMO Capital Markets, which raised its price target for the e-commerce giant's stock to $265 from $236. The firm cited a robust outlook for Amazon Web Services (AWS) and continued growth in retail and advertising as the primary reasons for the upward revision. BMO reiterated its 'Outperform' rating on the stock, indicating a bullish stance on Amazon's prospects.

AWS, Amazon's cloud computing arm, is expected to drive significant growth in 2025. BMO anticipates AWS growth to accelerate to 20% compared to the previous estimate of 17%. The firm noted that AWS CEO Matt Garman emphasized the potential for substantial cloud adoption among AWS's largest customers, many of whom currently have only 10-40% of their workloads in the cloud. Garman suggested that this figure could rise to 70-80% in the future, driven by ongoing innovation. "Telco and Healthcare have yet to meaningfully shift workloads to the Cloud, offering significant upside from current customers," added BMO Capital.



Amazon's retail and advertising segments also contribute to the company's overall growth and complement AWS's expansion. The retail segment attracts a large customer base, which can then be cross-sold AWS services. In Q3 2024, Amazon's retail segment had a market share of around 38% in the U.S. e-commerce market (Source: eMarketer). The advertising segment, which includes sponsored ads, display, and video advertising, helps AWS reach a broader audience. In 2024, Amazon's ad revenue is projected to reach $63.6 billion (Source: BMO Capital).



Amazon's diverse business segments allow for cost synergies and economies of scale. For instance, AWS can use Amazon's global infrastructure and data centers to host its services, reducing costs. Additionally, AWS can leverage Amazon's expertise in areas like machine learning and AI to develop new services and features, further driving growth.

In conclusion, Amazon's strong outlook for AWS, coupled with the complementary growth of its retail and advertising segments, has led BMO Capital Markets to raise its price target for the company's stock. Investors should consider the potential upside in Amazon's stock as the company continues to execute on its growth strategies. However, it is essential to remain vigilant and monitor the company's progress, as well as the broader market conditions, to make informed investment decisions.