Amazon.com Inc. (NASDAQ:AMZN | AMZN Price Prediction) remains among the most closely-watched mega-cap growths stocks in the market, and for good reason. The e-commerce giant is so much more than that, with a booming AWS cloud business being its primary earnings driver, and increased growth potential in recent quarters thanks to the company’s artificial intelligence integrations and capabilities.
Now, it’s clear not every investor in the market is completely sold on Amazon right now. The company’s stock price has seen volatility of late, and remains down over the past month.
Still, the stock is valued at roughly $1.9 trillion, and is expected to continue to perform well over the long-term relative to its Magnificent 7 peers. Much of this has to do with the company’s strong growth momentum in its cloud unit, with AWS seeing an impressive 18.7% revenue increase to $26.3 billion in Q2, largely thanks to increased AI adoption. Amazon also introduced new AI features, such as Rufus for shopping assistance and Maestro for music playlists.
Amazon’s strength lies in its diverse business model, spanning e-commerce, advertising, cloud computing, streaming, and exposure to more boring sectors such as consumer goods and groceries. Its robust cash flow supports ventures into new areas, such as healthcare. Despite a forward P/E ratio higher than the consumer discretionary average of 22.9, Amazon’s broad growth potential and competitive advantages justify the premium. Here’s the bull case behind why Amazon could hit $200 per share this year.
Key Points About This Article:
- Amazon remains a top Magnificent 7 stock many long-term investors are buying on its most recent dip.
- The bull case behind why AMZN stock could hit $200 is an interesting one to dive into, so let’s do just that.
- If you’re looking for some stocks with huge potential, make sure to grab a free copy of our brand-new “The Next NVIDIA” report. It features a software stock we’re confident has 10X potential.
Strong Earnings Lead to High Analyst Price Targets
An Amazon logo on a smartphone
After reporting second quarter earnings, Amazon stock sort of fell off a cliff. While some analysts had upped their price targets due to strong fundamentals and an increasingly rosy outlook for the stock, others saw the company’s year-to-date gains and valuation multiple expansion as key risks that could lead to more downside. Indeed, in terms of mega-cap tech stocks with varying opinions, Amazon is certainly a key stock many are watching right now.
That said, looking at the company’s numbers, it was yet another strong quarter for the e-commerce giant. Amazon’s retail segments in North America and internationally stabilized after the 2022 e-commerce slowdown. North American growth was driven by faster delivery and expanded advertising, while international gains came from entering high-growth markets. AWS saw accelerated growth, easing concerns about competition from Microsoft Azure and Google Cloud, thanks to rising demand for cloud infrastructure and AI applications.
Rising margins in Amazon’s AWS division are set to boost Amazon’s overall earnings growth via the higher margins this business carries. With strong financials and an expanding delivery segment, analysts forecast AMZN stock is likely to surpass $200, with an average target of $223.58, indicating roughly 24% upside from current levels. The most bearish price prediction for Amazon stock currently sits at $200, while bullish analysts project the stock could surge as high as $275 per share over the next year, a 47% increase from the current price.
Artificial Intelligence a Key Catalyst to Watch
A lit up brain on top of what appears to be a circuit board
Amazon is noted for its strength in its core logistics and cloud businesses. But the company is also making moves in enhancing its AI capabilities, recently agreeing to buy Perceive, a chip maker and AI model compression firm, for $80 million. The acquisition, detailed in Xperi’s SEC filing, is set to close by year-end. Perceive, based in San Jose, focuses on AI technologies for edge devices with limited resources.
An Amazon spokesperson highlighted excitement about integrating Perceive’s team to advance edge-device capabilities for large language models. Xperi had sought a buyer for Perceive, which employs 44 people, most of whom will join Amazon. The company anticipates no regulatory hurdles for the deal, considering it routine, despite increased scrutiny on AI acquisitions.
In other AI news, starting Monday, Amazon deployed robots on San Francisco’s Market Street to promote its new Generative AI exhibit. Set to open on Wednesday in the Financial District, the exhibit will feature AI art tools and holographic communication demonstrations. Over its eight-week run, it will offer events and three-day AI bootcamps for local entrepreneurs.
Amazon’s Generative AI Hub has moved to San Francisco, after a two-week stay in Bengaluru. These bootcamps later visit São Paulo, London, and Paris. This initiative is part of Amazon’s $230 million effort to boost AI startup development, emphasizing the company’s intention to build a robust community to test and stay current with AI innovations.
Where Could AMZN Stock Be Headed From Here?
Archery targets with arrows stuck on pieces of paper
Amazon’s average one-year price target is well above the $200 level, but that’s a price target that typically comes with a 12 to 18-month time horizon. In order for AMZN stock to hit $200 by the end of the year, a lot will need to go right. Of late, increased bets on interest rate cuts, and other macro catalysts which could drive risk assets higher, could be the catalysts that takes this stock to the next level.
I think the company’s upcoming earnings reports could also provide strong upside momentum, if it’s another beat-and-raise quarter. Of course, there’s plenty of uncertainty around any of these catalysts materializing. But as far as a top mega-cap tech stock with strong upside momentum is concerned, Amazon certainly appears to be headed in the right direction.
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