Jefferies Ups Amazon Price Target to $235 on Strong AWS and Advertising Growth

Jefferies analysts expressed strong confidence in Amazon (NASDAQ:AMZN), raising their price target to $235 from $225 per share. They highlighted robust growth in Amazon Web Services and advertising sectors as key reasons for their optimism.

Jefferies cited the combined momentum of AWS and advertising, along with retail operating leverage, as supportive of an 18%+ upside to their $235 target price.

The analysts emphasized that high-growth, high-margin segments significantly contribute to Amazon's overall value. They noted that 71% of Amazon's $2.5 trillion sum-of-the-parts enterprise value (SOTP EV) is derived from AWS and advertising, compared to only 26% from core retail.

They project AWS revenue growth to increase from 13% in Q4/23 to 21% in Q4/24, driven by diminishing cost optimization headwinds and rising demand for cloud modernization, especially with the integration of next-generation Artificial Intelligence.

In the advertising sector, Jefferies anticipates stable growth of over 20%, with additional gains expected from Prime Video. Their estimates suggest $2.9 billion in ad sales and around $800 million in incremental subscription sales from ad-free options on Prime Video in 2024, leading to a net sales increase of $3.7 billion.

Even Amazon's core retail business shows potential for improvement, focusing on better efficiency to drive higher margins. Jefferies concludes by highlighting the attractive valuation of Amazon stock, noting it trades at 13.6 times their 2025 EV/EBITDA estimate, which is about a 25% discount to the 10-year average of approximately 18 times.