Amazon.com Inc. shares have surged 75% this year, but some Wall Street analysts expect the party to carry over into 2024.
TD Cowen analyst John Blackledge named Amazon’s stock AMZN, +1.32% his top large-capitalization internet pick for next year, cheering the company’s margin trajectory and its potential to reaccelerate revenue within its Amazon Web Services cloud-computing unit.
Blackledge expects Amazon to post $ 58 billion in operating income for 2024, buoyed by high-margin AWS and advertising contributions. Meanwhile, recent cost cuts could drive operating-income momentum for the rest of the business. Blackledge is 25% above the consensus view with his forecast on the metric.
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He thinks Wall Street may be underappreciating the company’s advertising opportunity as it prepares to launch ads on Prime Video for all U.S. streaming households next year, while also giving people the ability to opt out of ads for $ 3 a month. The company could generate $ 1.5 billion to $ 3 billion in U.S. ad revenue in the first year and almost $ 800 million in opt-out revenue, by his math.
As for AWS, the cloud business looks poised to benefit “as enterprises move past recent cost optimizations and refocus on shifting additional workloads to public cloud over time,” Blackledge wrote. Generative AI should help drive additional revenue, in his view.
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He rates the stock at outperform and upped his price target to $ 200 from $ 180 in Thursday’s note.
Blackledge joins Bernstein analyst Mark Shmulik, who also named Amazon’s stock his best idea earlier this week. Amazon offers “quality, long-term growth,” according to Shmulik, and operating income “is poised for an unprecedented run.”
He has an outperform rating and a $ 175 target price on Amazon shares.
Shares of Amazon were up 1.6% in morning trading Thursday.
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