On Wednesday, Goldman Sachs updated its outlook on Amazon.com (NASDAQ:AMZN) stock, raising the e-commerce giant's price target to $225 from $220, while maintaining a Conviction Buy rating. The adjustment follows Amazon's first-quarter earnings for 2024, which surpassed the pre-earnings forecasts set by the firm.
The robust earnings report was highlighted by a notable increase in North American Operating Margins and a solid performance in International Operating Margins. Additionally, Amazon experienced mid 20% growth in Advertising revenue, as well as an unexpected rise in both AWS (cloud computing) revenue and segment Operating Margins.
Despite the positive outcomes, two main areas are expected to draw increased attention. The first is the health of the global consumer, particularly in light of reported weaknesses in Europe. The second is how Amazon management plans to balance growth investments with margin progression in the coming years.
Although e-commerce revenues were roughly in line with projections, a
deceleration in e-commerce relative to AWS and Advertising is anticipated beyond the first quarter.
Goldman Sachs noted that Amazon management conveyed a constructive tone regarding their ability to balance investments with margin expansion over time. The firm expects Amazon to continue improving profitability and reducing costs in its Worldwide Stores business, a potential that is believed to be underappreciated. Furthermore, there is renewed confidence in the long-term potential for International margins as emerging geographies move towards profitability.
InvestingPro Insights
Following Goldman Sachs' updated outlook on Amazon.com, real-time data from InvestingPro provides additional context to the company's financial health and market position. Amazon is currently trading at a high earnings multiple, with a P/E Ratio of 60.88 and an adjusted P/E Ratio for the last twelve months as of Q4 2023 at 61.64. This indicates a market expectation of continued growth and profitability, aligning with analysts' predictions that the company will remain profitable this year.
With a market capitalization of $1820.0 billion and a robust revenue growth of 11.83% over the last twelve months, Amazon stands as a dominant player in the Broadline Retail industry. The company's gross profit margin is substantial at 46.98%, demonstrating its efficiency in maintaining profitability amidst its expansive operations. Despite a recent price dip, the stock has seen a significant 27.74% price uptick over the last six months, reflecting investor confidence in its performance and growth trajectory.
For investors seeking a deeper dive into Amazon's financials and market performance, InvestingPro offers additional insights, including 11 more InvestingPro Tips on the company's debt levels, valuation multiples, and historical returns. Discover these tips and utilize the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, enhancing your investment strategy with comprehensive data and analysis.
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