Amazon (NASDAQ:AMZN) shares have been powering ahead for most of the second half of the year and investors have been enjoying the ride. As 2024 nears its close, the stock boasts a 50% gain for the year.
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The good news, according to Cowen analyst John Blackledge, is that 2025 is shaping up to be a great year for the e-commerce giant too.
In fact, looking ahead to the new year, the 5-star analyst says Amazon is “our top ’25 large cap pick.”
Blackledge’s bullish outlook is driven by a few key drivers. For one, the analyst expects “continued margin expansion,” forecasting 2025 operating income will hit $85.6 billion, 6% above consensus, with GAAP operating margins reaching 12%. This will be fueled by the continued scaling of the high-margin AWS and Advertising segments, along with improved e-commerce margins driven by lower cost to serve.
Secondly, Blackledge anticipates AWS revenue growth will accelerate for the second consecutive year, reaching 21% in 2025, compared to his call for 19% growth in 2024. This is because Amazon will see the benefits of “enterprise workload migration alongside burgeoning GenAI offerings.”
Thirdly, an expanding net cash position will result in capital allocation opportunities. Blackledge reckons Amazon will see out 2024 with $67 billion in net cash, increasing to $133 billion by the end of 2025, as free cash flow grows on the back of rising margins, even in the face of accelerating CapEx.
Elsewhere, one aspect Blackledge thinks is being underappreciated concerns delivery speeds. The analyst sees this factor as a “tailwind driving rising penetration & market share gains” in low ASP (average selling price) goods. Approximately 80-90% of household goods fall into the low ASP category, which remains under-penetrated by Amazon.
Additionally, AWS remains a major growth engine. Blackledge expects the cloud platform to solidify its leadership in generative AI, with AWS revenue projected to hit $6.1 billion next year and grow to $31 billion by 2029.
What does this all mean for investors? Blackledge rates AMZN shares a Buy, while raising his price target from $240 to $265, implying the stock will gain another ~17% in the months ahead. (To watch Blackledge’s track record, click here)
There’s hardly any argument on Wall Street with that take. While only one analyst remains on the sidelines, all 46 other recent analyst reviews are positive, making the consensus view a Strong Buy. However, going by the $241.95 average target, the stock has room for only a modest 6% gain over the coming year. (See Amazon stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
