Amazon (NASDAQ:AMZN) shares have been climbing steadily over the past year, surging 40% and outpacing the S&P 500’s 23% return during the same period. This solid performance is largely attributed to robust growth in the company’s cloud computing division, Amazon Web Services (AWS), and significant investments in artificial intelligence (AI).
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Building on this momentum, Amazon is set to release its latest financial results today after the market closes, following its tech giant peers that have already reported their 4Q24 earnings.
According to Bank of America’s Justin Post, an analyst who ranks in the top 1% of Wall Street stock experts, the signs point to a strong showing from the e-commerce behemoth.
“We think Amazon had a solid 4Q with fulfilment/headcount leverage,” the 5-star analyst said. “4Q Retail data was constructive for revenues, and for cloud, we think AWS can meet expectations for 19-20% growth on a growing AI contribution.”
Post is calling for Q4 revenue of $187 billion, in line with the Street, and GAAP operating profit of $19.7 billion, trumping consensus at $18.9 billion.
Beyond the headline metrics, AWS growth will be a focal point, with the Street expecting a 19% year-over-year uptick, stable compared to Q3. “We think cloud demand likely remained robust in 4Q, and anticipate strong AI demand to continue into 2025 (potentially contributing 8pts to growth in ’25),” Post opined. Key growth drivers include Amazon’s expanding partnership with Anthropic, the introduction of new competitive AI products such as the Nova models, and reduced infrastructure costs driven by Trainium. Additionally, increasing GPU availability should also contribute to growth. AI scaling and AWS margins, which Post thinks might have peaked in 2024 due to strong demand and rising depreciation costs, will also be under the microscope.
For retail, BofA’s aggregated credit and debit card data shows ecommerce sales grew 4% YoY in Q4, accelerating slightly from 3% in Q3. Meanwhile, Bloomberg Second Measure data suggests sales remained stable quarter-over-quarter. “We think Amazon likely gained share during the shortened holiday window, so we expect a beat vs Street’s projection of 8% y/y N.A. Retail growth, slowing 1pt q/q,” Post said on the matter.
On profitability, Post anticipates North America Retail margins will expand by 90 basis points YoY to 7.0%, outperforming the Street at 6.7% and boosted by operating leverage from ~11% unit growth, as well as effective inventory and shipping management during the holiday season.
As for the outlook, Post is calling for Q1 revenue of $155.25 billion at the midpoint, while the Street’s forecast is $3.3 billion (2.1%) above Post’s forecast. The analyst expects Q1 Operating Income in the range between $15 billion to $19 billion, also below consensus estimates.
So, what does this all mean for investors? Post considers AMZN a “top pick” and maintained a Buy rating on the shares while his $255 price objective factors in 12-month returns of 8%. (To watch Post’s track record, click here)
There’s hardly any pushback on that thesis amongst Post’s colleagues; the stock claims a Strong Buy consensus rating, based on 39 Buys vs. 1 Hold. Going by the $261.78 average target, a year from now, shares will be changing hands for a 10% premium. (See AMZN 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.
