Amazon: Analyst Raises Price Target and Optimism

Tech giant Amazon is once again in the spotlight. Truist analyst Youssef Squali has reaffirmed his buy recommendation and raised the company's price target from $230 to $265, implying a potential price increase of 43% within the next twelve months. Squali bases his optimistic assessment on Truist card data, which has tracked Amazon's revenues in the U.S. and suggests that the company could meet or even exceed its sales targets for the third quarter. Particularly after several quarters of single-digit growth in recent years, double-digit revenue growth would be a strong signal for investors. The increasing resilience of consumer spending, enhanced advertising revenue, accelerated growth of Amazon Web Services (AWS), and improved operating margins all contribute to Squali's positive outlook. Despite intensive investments in artificial intelligence, AWS, logistics, and Project Kuiper, Squali sees further upside potential for Amazon. Currently, the company is valued at 18 times its operating cash flow, which represents the lowest value since 2010 and significantly below the 10-year average of 28. This ratio highlights the potential for free cash flow should Amazon ever decide to invest less in its growth. However, the continuous investment in innovative business areas such as AWS, online advertising, and its own logistics network makes Amazon one of the most dynamic companies in the market. Amazon's valuation seems relatively inexpensive at present, especially considering an increasing liquid margin of 18%, while the company is heavily investing in growth. These arguments align well with Squali's optimistic assessment. Particularly noteworthy is Amazon's AWS division, which leads the rapidly growing cloud infrastructure sector with a market share of 31%, expected to double by 2028. Since AWS generates more than half of the operating profit, the financial cushion for Amazon's growth orientation appears secure. A final thought for potential investors: although Amazon's fundamental data appears strong, the company does not feature in every analyst's top list. Other investments could be equally lucrative in the coming years.