Fuguo Bank downgrades Amazon's rating: Strong cloud computing performance cannot hide short-term concerns
Citibank Securities downgraded Amazon's rating from "buy" to "hold" with a target price lowered from $225 to $183, reflecting concerns about its short-term profit margins. Despite a 19% increase in Amazon's stock price this year, analysts still warn that profit margin expansion in the first half of 2025 may be limited. Nevertheless, about 94% of analysts still give Amazon a "buy" rating with an average target price of $219, indicating a 21% upside potential in the next 12 months, mainly driven by the growth of its cloud computing business
Zhitong Finance APP learned that Amazon (AMZN.US) stock price experienced a decline on Monday. The reason was that Ken Gawrelski, an analyst at Wells Fargo Securities, unusually downgraded the rating of the company from "Buy" to "Hold" and significantly reduced the target price from $225 to $183. This adjustment reflects market concerns about Amazon's profit margin trend next year. Although the growth prospects of its cloud computing business are promising, it seems insufficient to offset this negative impact. Nevertheless, Amazon's stock price has still risen by 19% this year, slightly higher than the 18% increase in the Nasdaq 100 index.
In a detailed analysis, Gawrelski pointed out that although Amazon's performance shows a positive correction trend, some factors in the short term may put pressure on this trend. He warned that even though the market has been prepared for revenue pressure in the fourth quarter, profit margin expansion in the first half of 2025 may be limited. Positive estimate revisions are unlikely before the company's outlook in July 2025, even for Amazon's cloud computing business - Amazon Web Services (AWS), which may not be sufficient to support.
Nevertheless, Amazon remains a darling of Wall Street, with about 94% of analysts giving it a "Buy" rating, and no analysts recommending selling. The average target price from analysts is around $219, indicating a 21% upside potential in the next 12 months.
This widespread optimism is largely related to the prospects of the AWS business, which is expected to benefit from the long-term growth in demand for artificial intelligence.
Despite recent concerns about the company's spending on artificial intelligence investments, Bloomberg Industry Research estimates that by 2025, AWS sales growth may accelerate by 20%, exceeding the general expectations by about 200 basis points. The contribution of artificial intelligence will be more significant, while non-artificial intelligence IT spending demand will tend to stabilize