Amazon (NASDAQ: AMZN) stock’s been one of the highlights of earnings season so far. After the company posted its Q3 results, its share price shot up more than 10%.
Wall Street analysts believe it can keep climbing. Here’s a look at some new price targets for the Big Tech stock.
Strong Q3 earnings
Amazon’s Q3 earnings were strong, and much better than expected. For the quarter, revenue was up 13% year on year to $180.2bn. Analysts had been expecting $177.8bn.
Earnings per share came in at $1.95. This was up 36% and miles ahead of the consensus forecast of $1.57.
What really excited investors was a reacceleration in cloud computing (AWS). Here, growth was 20% – the fastest rate since 2022 (analysts had been expecting 18%).
Granted, this wasn’t as high as the level of growth that Microsoft (39%) and Alphabet (34%) generated in cloud computing. Amazon’s a bigger company so it’s unlikely to grow as fast.
Another highlight was revenue from digital advertising (where Amazon is the third largest player in the world today). This was up 24% to around $17.7bn.
New price targets
Since the Q3 earnings, Wall Street analysts have been scrambling to raise their price targets for the stock. And many have pencilled in $300 as a medium-term target.
Some of the firms that have gone to $300 (or higher) include Barclays, Bernstein, BMO, BofA Global Research, Canaccord Genuity, Citigroup, Citizens, DA Davidson, JP Morgan, Morgan Stanley, Susquehanna, TD Cowen, UBS, and Wedbush. So clearly, the consensus is that $300’s achievable.
Note that this figure represents a gain of around 17% from here. That would be a good result from a large-cap stock in the medium term, however, there’s obviously no guarantee it will get there.
Worth a look today?
Is the stock worth considering given this bullish analyst sentiment? I think so.
The way I see it, this company is almost guaranteed to get much bigger in the years ahead. Not only does it have a fast growing cloud computing division (which just announced a partnership with OpenAI), but it also has online shopping, its own high-powered computer chips, digital advertising, self-driving cars, and space satellite operations.
As for the valuation, it’s not stretched right now if you ask me. Looking at analysts’ earnings forecasts for next year (which may be increased in the weeks ahead after the great Q3 results), the forward-looking price-to-earnings (P/E) ratio is 31.
That may not be a bargain valuation. But I don’t think it’s unreasonable for a diversified tech company that has rewarded investors with 20%+ returns a year over the last few decades.
Of course, there are plenty of risks here. These include a slowdown in online shopping due to consumer weakness, competition in cloud computing, and disruption in digital advertising (eg consumers ordering goods directly from ChatGPT).
Overall though, I like the risk/reward proposition at current prices. To my mind, this stock could be a great core holding to consider (it is for me).
