Amazon’s stock experienced a notable increase of 2% on Tuesday, closing at $212.77. Analyst Michael Morton from MoffettNathanson has raised his price target for the stock from $250 to $253, indicating a potential upside of around 19% from current levels. Morton remains optimistic about Amazon’s ability to exceed profit estimates in 2025 and 2026, despite acknowledging rising cost pressures in its cloud service, Amazon Web Services (AWS).
Morton has built a reputational success rate of 70%, with an impressive average return of 22.5% per rating over a one-year period. His analysis highlights that while Amazon is predominantly recognized for its retail business, significant profits are derived from AWS and the company’s advertising sector.
His latest analysis took into account Amazon’s recent quarterly segment-level depreciation details, which led Morton to adjust his AWS predictions. He contends that many analysts may be underestimating the forthcoming rise in costs associated with AWS due to substantial investments, estimated at around $200 billion from fiscal year 2024 to 2026. These investments will mainly focus on servers and network infrastructure, which tend to depreciate rapidly. Consequently, he anticipates that depreciation costs will increase significantly, affecting AWS’s profit margins.
Despite these anticipated margin pressures, Morton maintains a positive outlook for Amazon’s performance over the next 18 months, particularly for AWS margins in 2025. He expects strong demand, improved cost efficiency, and steady growth in the lucrative advertising business to contribute to beating profit expectations in the upcoming years.
The overall sentiment on Wall Street is favorable toward Amazon, reflected in a Strong Buy consensus rating comprising 47 Buys and a single Hold recommendation. The average price prediction of $243 for Amazon’s stock suggests an upside potential of approximately 14.21%.
With strong analyst support and a robust market position, Amazon appears to be well-prepared for future growth, making it an attractive option for investors looking to capitalize on potential gains in the tech sector.