Why One Top Analyst Is Bullish on Amazon Stock (AMZN) Despite AWS Cost Pressures
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It is worth noting that Morton has a success rate of 70%, with an average return per rating of 22.5% over a one-year timeframe.
Top Analyst's Take on Amazon
The analyst said that while Amazon is known for its shopping business, its real profits come from AWS and advertising. Following Amazon's latest quarterly breakdown on segment-level depreciation, Morton updated his AWS forecast and believes that most analysts may be underestimating the rising costs from Amazon's large cloud investments.
He expects Amazon to spend about '$200 billion from FY24 to FY26 ' to expand AWS, mostly on servers and network equipment, which lose value quickly over time. As a result, depreciation costs at AWS are set to rise from '13% in Q424 to 23% in Q426.' This could lower AWS profit margins by about 10 percentage points.
Even with some margin pressure ahead, Morton remains upbeat about Amazon's outlook. He sees the next 18 months as strong, particularly for AWS margins in 2025. He expects Amazon to beat profit estimates in both 2025 and 2026, supported by strong demand, better cost efficiency, and steady growth in its high-margin advertising business.
His updated price target of $253 reflects the view that Amazon's strong earnings performance in the near term is not yet fully priced in by the market.
What Is the Price Target for Amazon Stock?
Overall, Wall Street is bullish on Amazon stock, with a Strong Buy consensus rating based on 47 Buys and one Hold recommendation. The average AMZN stock price forecast of $243 indicates 14.21% upside potential.
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