It’s secure to say most investors didn’t foresee shares of Amazon (NASDAQ:AMZN) shedding 50% of their value last 12 months but that’s the way it panned out in 2022’s market rout. Nevertheless, 2023 is off to an honest start with the stock showing year-to-date gains of 13%.
Sachin Mittal – Head of Telecom, Media and Technology Research of Singapore banking giant DBS – thinks there are enough reasons for Amazon to maintain pushing ahead and points to several elements of its multi-thronged business that can help to achieve this.
First off, there’s Amazon Web Services (AWS), which within the face of macro uncertainties, “continues to be the important thing growth driver.” With cloud infrastructure spending expected to be reined in by soaring inflation and a technical recession within the U.S., the segment continues to be showing “resilience.” Taking a 32% share of the worldwide market actually helps and considering that it contributed just 16% to 3Q22 revenue but represented all the corporate’s profit, Mittal says it’s “undoubtedly the most respected business for AMZN.”
Then there’s essentially the most recent “growth driver,” Amazon’s Promoting business, which is predicted to account for 7% of world digital ad revenue in 2022, in comparison with lower than 1% just six years ago, based on eMarketer. The segment generated revenue of $9.6 billion in 3Q22, amounting to a 25% year-over-year uptick, easily beating rivals resembling SNAP (6%), TWTR (2%) and META (-4%). Explaining why Amazon’s ad sales have “grown dramatically” vs. peers, Mittal thinks more advertisers are “turning to AMZN’s retail media network to deceive Apple’s privacy changes and catch up with to shoppers.”
Lastly, there’s the bread-and-butter e-commerce segment, which continues to be attempting to “determine a method to return to its roots of profitability.” Yet here, Mittal can be optimistic, noting that with a 38% chunk of the US e-commerce sector, it continues to be the dominant ecommerce player while also “more likely to experience margin expansion.”
For all of the above reasons, Mittal rates Amazon stock a Buy while his $124 price goal suggests the shares are undervalued by 30%.
Over the past 3 months, 39 analysts have waded in with AMZN reviews and these breakdown 36 to three in favor of Buys over Holds, all naturally culminating in a Strong Buy consensus rating. At $136.91, the typical goal makes room for 12-month returns of ~44%. (See Amazon stock forecast)
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Disclaimer: The opinions expressed in this text are solely those of the featured analyst. The content is meant for use for informational purposes only. It is rather vital to do your individual evaluation before making any investment.