Amazon (NASDAQ:AMZN) was initiated with a Buy rating and $160 per share price target by HSBC analysts in a note to clients on Thursday.
The firm told investors that Amazon’s structural opportunity in cloud surpasses even the lock-in effect with consumers in e-commerce.
“AWS remains one of the most attractive stories in tech; short-term growth hiccups don’t impair the secular growth story,” the investment bank wrote.
“We believe Amazon is at an inflection point. While fixing the overinvestment issue will require more time, we expect greater focus on costs and slowing capex to drive a material increase in FCF. In sum, our estimates for cumulative capex for 2024-25 are USD8.7bn below consensus, which puts us 13-14% above consensus FCF(CFO-capex),” the firm added.
The analysts also described AWS as Amazon’s crown jewel, stating that it enables everything that Amazon does.
“Although much of Amazon’s recent de-rating appears to have been driven by slowing growth at AWS, we have high conviction that this is short-term and macro-driven, and that investors should have confidence in the long-term growth opportunity that the secular shift into the cloud will bring. We think customers optimising spend is a key argument pro-cloud, not a sign of weakness,” said HSBC.
“We believe that the short-term cyclical headwinds at AWS create an attractive entry point in one of the best secular growth stories in tech,” the firm concluded.