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AI and the cloud in focus for Wall Street as analysts grow bullish ahead of earnings
- Wall Street investors are expecting solid results from the tech giant Amazon as the company prepares to publish fourth-quarter earnings after the bell on Thursday. The firm's strong holiday demand and ad revenue growth are among the positive drivers. Amazon's cloud-computing platform, AWS, is one key driver of growth both in Q4 and throughout 2025.
- Following Amazon's earnings report, BofA expects investors will focus on AWS growth, AI scaling, and 2025 expenditure outlooks. Deutsche Bank is bullish on cloud demand. As well as a beat driven by the US customer backdrop and increased demand for AI, AWS margins and retail gross profit per unit should outpace expectations, making $21 billion in operating income look achievable to the bank.
- Wedbush Securities expects Amazon to deliver $20.7 billion in Q4's operating income, 9% above consensus estimates. The company has exceeded initial 2024 income expectations by over 40%, and analysts expect Amazon to repeat its performance. Most notable are the firm's retail efficiency gains and strong US holiday period. Wedbush increased its price target to $280, almost 20% above current levels.
- Research analyst Brian Nowak says Amazon's warehouse business uses robotics to increase efficiencies across storage, inventory management, sorting, and outbound order processes. Automation could have a significant impact on long-term earnings before interest and taxes potential, as fulfillment costs account for almost 20% of revenue. Morgan Stanley analysts expect the company's robotics advancement to unlock $10 billion in savings by 2030.
- Improving ad-spend growth in Q4 is a positive trend for e-commerce, and consumer spending is normalizing, which is positive for Amazon. Both staples and discretionary products show pricing improvements, pointing to a healthier consumer environment, according to Mizuho analysts.
- Bank of America predicts Amazon will beat operating profit estimates at $19.7 billion, with $187 billion in quarterly sales. Deutsche Bank has set a $275 price target on Amazon, an almost 17% increase from current levels. Meanwhile, Morgan Stanley holds an 'Overweight' rating on Amazon, with a $280 price target indicating a 19% increase from current levels. Finally, Mizuho has set its price target at $285, almost 20% higher than current levels.
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