Amazon (NASDAQ:AMZN) stock has surged to new all-time highs last week, with shares now up 26% over the past month. Sentiment has clearly shifted in the tech giant’s favor after a period marked by concerns about its AI positioning and relatively slower cloud revenue growth.
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Trade AMZN with leverageThose concerns have largely faded, and last week’s announcement of an expanded partnership with Anthropic reinforced the view that Amazon is strengthening its position in the AI race, giving investors a clearer reason to re-rate the shares.
With the company slated to deliver Q1 earnings on Wednesday (April 29), Roth analyst Rohit Kulkarni “remains constructive” on the setup, but also heeds caution, considering the recent gains.
“We believe sentiment is firmly bullish into the print, driven by AWS acceleration and AI exposure, but expectations have moved higher quickly,” the 5-star analyst said. “Risk/reward is now more balanced, with stock reaction likely dictated by 1Q AWS acceleration and 2Q Op Income guidance rather than 1Q Rev & Op Inc. vs. guidance.”
Kulkarni sees Q1 AWS growth up roughly 29–30% year-over-year, higher than the prior expectation of about 27–28%, on account of “continued AI-driven demand.” The analyst expects total revenue to come in near $179 billion, representing around 15% y/y growth and slightly exceeding the guide, while operating income is anticipated at approximately $22–23 billion, about $1 billion above the company’s outlook. Kulkarni notes that retail trends “remain stable,” with North America set to grow around 10–11% and international markets in the mid-teens, although margin expansion is being partly offset by cost pressures due to higher gas prices.
For Q2, the primary focus is on the operating income guidance, where Kulkarni believes current Street expectations near $23 billion may be somewhat ambitious. Revenue guidance is likely to fall in the $188–190 billion range, with key swing factors including fuel costs, the timing of Prime Day, and incremental spending tied to initiatives such as Project Leo.
“Risk skew is toward downward estimate revisions, which historically pressure the stock,” Kulkarni further said.
As for the key debates, these center on several areas, with Kulkarni outlining his views on each. First, as mentioned, the all-important AWS growth will be in focus. There appears to be near-term acceleration, although its durability will depend on the strength of AI-driven demand. Second, the extent to which AWS captures demand from Anthropic remains unclear, though it is likely split roughly 70–30 in favor of AWS versus Google. Third, while capital expenditures are expected to generate solid returns over the long term, the timing of those returns remains uncertain. Fourth, consumer demand is holding steady, with Kulkarni seeing no meaningful signs of deterioration so far. Finally, there is a risk that Q2 operating income guidance could reset expectations lower, as current Street estimates appear “too high.”
Overall, while Kulkarni is not particularly enthusiastic about AMZN stock after its recent run and sees a more balanced risk-reward profile at current levels, he’s not stepping aside either. His Buy rating stays in place, and his $285 price target implies about 8% upside over the coming year. (To watch Kulkarni’s track record, click here)
Elsewhere on the Street, AMZN stock claims an additional 41 Buys and 3 Holds, for a Strong Buy consensus rating. The $287.33 average price target is only slightly higher than Kulkarni’s objective and set to deliver gains of ~9% in the months ahead. (See AMZN stock forecast)
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.