Following a splendid showcase in the previous year, the performance of the “Magnificent 7” stocks in 2024 has been a mixed bag. Unlike the blanket rally witnessed amongst mega-cap tech giants last year, Apple (AAPL) and Tesla (TSLA) are currently in the red this year. Nevertheless, the Nasdaq Composite ($NASX) has seen a growth of over 8% amid this landscape.
On the flip side, Amazon (AMZN), Nvidia (NVDA), Alphabet (GOOG), and Meta Platforms (META) continue their upward trajectory in 2024. Notably, Amazon’s stock has soared nearly 19% year-to-date, inching closer to its historical peak of $188.65 recorded back in July 2021. The burning question now looms – How high can AMZN stock ascend in 2024?
Bright Analyst Projections for Amazon
Analysts have set a mean target price of $202.49 for Amazon – a hefty 12% escalation from the previous day’s close. The notably optimistic Street-high target stands at $230, suggesting a pulsating 27.2% upside over the forthcoming year.
Embracing a bullish stance, analysts have collectively hailed Amazon, designating it as a prime pick for 2024. Garnering a unanimous “Strong Buy” consensus rating, Amazon reigns as the top-rated stock among the esteemed Magnificent 7.
Remarkably, analysts have consistently raised Amazon’s target prices subsequent to the company’s recent two earnings calls, driven by impressive top and bottom line performances. With the Q1 earnings proclamation on the horizon, a potential further reshuffle of Amazon’s target price remains within sight.
Amazon’s Profit Soars in 2023
In Q4, Amazon soared to a record net profit of $10.6 billion, surpassing its prior zenith of $9.9 billion set in the preceding quarter. The company’s operating income witnessed a meteoric rise in Q4, scaling up nearly five times from the equivalent period a year ago, and surpassing its guidance’s upper limit by over $2.2 billion.
Looking into Q1, Amazon forecasts revenues ranging between $138 billion and $143.5 billion, signaling an 8%-13% year-over-year surge. Furthermore, the expected Q1 operating income of $8 billion to $12 billion significantly eclipses the $4.8 billion reported in Q1 of 2023.
Of paramount significance, Amazon has rebounded as a cash flow powerhouse, churning out free cash flows of $36.8 billion in 2023. This remarkable turnaround follows two consecutive years of negative free cash flows.
The Bright Horizon for AMZN Stock
Despite its towering ascent over the past year, propelling it to stand on the cusp of its historical highs, Amazon’s stock still harbors a reasonable upward trajectory and appears poised to claim the next $2 trillion throne. Here’s why the forecast for AMZN stock looks ever so bullish.
- Stabilized Growth Trajectory: Amazon’s top-line growth has stabilized, including a robust 13% revenue increase year-over-year for its enterprise-centric arm, Amazon Web Services (AWS).
- Prolific Advertising Revenue: Amazon’s advertising revenues surged by 26% in 2023, reaching $46.9 billion. The upward trajectory is expected to persist, especially with the introduction of the ad-supported tier for Prime users.
- Generative AI Revolution: Underscoring generative AI as a strategic focus, CEO Andy Jassy highlighted its potential to drive tens of billions in revenue for Amazon over the coming years, notwithstanding its current revenue contribution.
- Emerging Business Ventures: Amazon’s burgeoning business-to-business (B2B) and pharmacy platforms present promising growth avenues. These nascent ventures are anticipated to bolster the company’s revenue stream moving forward.
- Emphasis on Efficiency: Amazon’s renewed focus on operational efficiency, cost reduction, and leveraging fixed costs indicates a pathway to enhanced profitability and cash flows, following a period of margin compression and over-investment.
Furthermore, at a forward price-to-earnings (PE) multiple of 42.8x for the next 12 months, Amazon’s soaring 47% earnings per share growth projection for 2024 paints an enticing picture. Despite the substantial gains witnessed in 2024, AMZN stock exhibits further runway for growth, buoyed by its appealing valuations and robust growth outlook.
On the day of publication, Mohit Oberoi held positions in: AMZN, AAPL, META, TSLA, NV DA, GOOG. The data and information presented in this article are intended solely for informational purposes. For additional details, please refer to the Barchart Disclosure Policy here.
The opinions expressed in this article solely reflect those of the author and may not necessarily align with those of Nasdaq, Inc.
