Amazon (NASDAQ:AMZN) is set to take center stage today as the Q3 earnings season reaches its climax.
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With recent shake-ups among major players, including Google and Apple’s antitrust issues, investors might be intrigued by Oppenheimer analyst Jason Helfstein’s remark, calling Amazon the “most controversial large-cap ahead of Q3 earnings.”
Helfstein, who’s ranked in the top 4% of TipRanks’ stock experts, highlights investor concerns around AWS revenue and margins, possible competitive pressure from Walmart in 3P seller services, and ongoing challenges in Amazon’s online store revenue and margins.
Are those concerns justified? Third-party data shows AWS revenue actually accelerating quarter-to-date, significantly outpacing both Oppenheimer and Street year-over-year growth forecasts of 19%, thus “elevating buy-side expectations.” At the same time, consensus estimates suggest FY25E core AWS EBIT margins (excluding benefits from extended server life depreciation) are set to rise by 163 basis y/y compared to bigger gains of 312bps and 474bps in 2023 and 2024, respectively.
Meanwhile, the macro picture “remains stable.” Q3 US retail sales are up 4% vs. Q2’s 3% uptick and “likely stronger than when AMZN guided.” Additionally, third-party forecasts see U.S. online holiday sales growing by 8-10%, with Adobe’s forecast suggesting an acceleration compared to 2023’s 5% growth.
While investors have been worried about the costs associated with the launch of Kuiper, Amazon’s satellite internet initiative, Helfstein thinks these concerns are “overblown.” The analyst believes Kuiper will lower FY25E/FY26E e-commerce margins by 50 and 60 basis points. While the timing and success of satellite launches and regulatory milestones pose some risks, the downside is “quantifiable,” as the company has guided for a $10 billion investment over Kuiper’s lifetime. For context, Starlink is on pace to generate $6.6 billion in revenue this year. “We see a significant long-term revenue opportunity,” Helfstein said on the matter, “with a target audience >1 billion people.”
All in, Helfstein rates AMZN shares as Outperform (i.e., Buy) while his $220 price target implies the stock will gain 18% over the coming months. (To watch Helfstein’s track record, click here)
That’s hardly a controversial take on Wall Street; with an additional 45 Buy recommendations pitted against just 2 Holds, the stock claims a Strong Buy consensus rating. The average target currently stands at $224.14, factoring in 12-month returns of ~20%. (See Amazon stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
