Amazon.com (AMZN) has started strong out of the gate in 2024, with its fourth-quarter earnings report in February sending its stock soaring. But with its first quarter earnings report coming up, the tech behemoth still has work ahead. Amazon stock analysts are watching for whether the company will keep improving the profitability of its massive online retail business, while also fending off challengers in the cloud-computing market.
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With a market cap above $1.8 trillion, Amazon is among the world's most valuable companies. The Seattle-based company recently surpassed a record high share price it last reached in 2021. But it is facing stepped-up competition for digital sales from Walmart (WMT) and Target (TGT). Meanwhile, it is battling Microsoft (MSFT) to be the leading cloud-platform for generative artificial intelligence.
Amazon is the market leader in e-commerce, as well as cloud-computing through its Amazon Web Services division, or AWS. The company has turned to AI and a booming advertising business to boost its growth.
However,Amazon is extended well above its last proper buy point. And the so-called "Everything Store" operator is also staring down a major antitrust battle with the U.S. government.
So, is Amazon stock a buy? Here's what to know about recent action from the tech giant's AMZN stock.
Q1 Earnings Preview: What Microsoft, Google Results Mean For Amazon
Amazon will report its first quarter earnings on Tuesday, April 30. That could be the next catalyst for Amazon stock.
Overall, Amazon is expected to post a 12% year over year increase in sales, to $142.6 billion, according to FactSet. Analysts expect earnings per share to rise 170% to 84 cents per share, per FactSet.
Further, analysts expect 15% year over year sales growth for AWS, representing $24.56 billion in revenue. That's compared to 13% growth in the December quarter. That would give the cloud-computing division two consecutive quarters of faster growth for the first time since the fourth quarter 2021. Cloud spending by companies began to slow in 2022.
Amazon's cloud rivals Microsoft and Google parent company Alphabet (GOOGL) both posted strong quarterly results ahead of Amazon's report. Microsoft said its Azure cloud business grew 31% year-over-year in its March quarter, accelerating from 30% growth a quarter earlier. Alphabet, meanwhile, said cloud revenue grew 28% year-over-year, up from 25% in the December quarter.
Both Microsoft and Google officials pointed to AI and stronger overall cloud demand for improved results, Stifel analyst Brad Reback wrote to clients Friday. "The final piece in the 1Q consumption puzzle will be AWS' results and commentary," he added.
Amazon Q1: Watching Advertising
Amazon's advertising business also bears watching. Digital ads are again projected to be Amazon's fastest growing division for the first quarter. Analysts projects sales will increasing 23.5% year over year to $11.74 billion, according to FactSet.
Amazon started running video adds on its Prime service in late January, providing another potential boost. The majority of Amazon's ad revenue comes from selling placements on its e-commerce marketplace.
Wedbush analyst Scott Devitt wrote in a recent Amazon earnings preview that he is looking for "sustained advertising momentum," "accelerating AWS growth," and continued margin improvements for Amazon's North America and international retail divisions.
Amazon's AI-related costs could come into focus as well. Shares of Meta (META) tanked on Thursday after the social media giant raised its capital expenditures guidance to support its own AI ambitions.
Amazon Slumps After Hitting All-Time High
Meanwhile, Amazon stock has slumped slightly heading into earnings. Shares hit a new all-time high on April 11 when they closed at 189.05. But Amazon has posted gains in just two out of the 10 trading days since then. Shares are off the April 11 high by about 5% as of mid-day Friday, April 26.
Shares of Amazon are up about 18% from the start of the year. Wall Street analysts expect Amazon stock to keep gaining.
Of the 63 Amazon stock analysts following the company, 95% hold a buy rating, according to FactSet. Further, FactSet data shows those analysts have, on average, set a 12-month price target of 212.45 for Amazon stock, according to FactSet. That implies roughly 17% upside from Amazon's mid-day trading price Friday.
Amazon's AI Push
The new high for Amazon came the same day that Chief Executive Andy Jassy published the tech giant's annual letter to shareholders.
In the letter, Jassy touted Amazon's focus on generative artificial intelligence, as well as the technology's potential.
"Generative AI may be the largest technology transformation since the cloud (which itself, is still in the early stages), and perhaps since the Internet," Jassy wrote. "Unlike the mass modernization of on-premises infrastructure to the cloud ... this GenAI revolution will be built from the start on top of the cloud. The amount of societal and business benefit from the solutions that will be possible will astound us all."
Market analysts expect generative AI will drive companies to spend more on cloud services. That means the big three providers of Amazon, Microsoft and Google are jockeying for position to host AI computing.
In March, Amazon announced that it invested an additional $2.75 billion in the AI startup Anthropic, completing a $4 billion deal with the artificial intelligence startup from late last year.
Anthropic is the developer of the chatbot Claude. Claude competes with OpenAI's ChatGPT, which launched the generative AI craze late in 2022.
After Amazon announced the deal, BofA Securities analyst Justin Post wrote that it could help narrow the "perception gap" that Amazon has with Microsoft. Microsoft, whose Azure service is the No. 2 cloud-computing provider behind AWS, was quicker to embrace generative AI. Just weeks after ChatGPT launched as a viral online hit, Microsoft reportedly agreed to invest $10 billion as part of a strategic partnership with OpenAI.
But AWS' deal with Anthropic gives the company its own AI partner. Further, the tech giant launched Amazon Bedrock roughly one year ago. The service allows users of Amazon's AWS to build generative AI applications using a range of large language models, including the latest from Anthropic.
Microsoft and Google, however, both recorded faster overall growth for their cloud businesses in the fourth quarter. So the battle is on for Amazon to defend its title of cloud king.
How Amazon Performed In Fourth Quarter
Wall Street analysts raised their target prices and estimates for Amazon following its fourth quarter earnings report.
In results published Feb. 1, Amazonsaid it earned $1 per share on sales of $170 billionfor the December-ended quarter. Analysts projected the company would post earnings per share of 80 cents on $165.9 billion in sales for the December quarter, according to FactSet.
Sales for the quarter increased 14% year over year, while earnings surged from 3 cents a share in the year-ago quarter.
Meanwhile, sales for Amazon Web Services increased 13% year over year to $24.2 billion, in linewith expectationsfor the closely watched cloud business.
Amazon stock jumped 8% in next-day trading. William Blair analyst Dylan Carden wrote in a client note that day that Amazon provided "a decidedly good print, with better outlook and room for continued upside."
Amazon Stock: Wall Street Projections For 2024
After posting a loss in 2022, Amazon's earnings bounced back in a big way last year. Now, Wall Street analysts are expecting further earnings growth for 2024. Consensus projections see Amazon's posting adjusted earnings of $4.19 per share for the December 2024 fiscal year, according to FactSet. That would mark a 44% increase from 2023. Amazon's earnings climbed to $2.90 per share for fiscal year 2023, compared to a loss of 27 cents per share in 2022.
Further, Amazon's operating income is expected to climb 50% to $55 billion in 2024. That's a slowdown from the 200% in operating income Amazon posted in 2023 but the growth rate last year benefited from comparisons to 2022, when operating income sank 51% to $12.25 billion.
Amazon's revenue, meanwhile, is expected to grow 11.7% to $642.27 billion in 2024. Sales grew 11.8% in 2023 and 9.4% in 2022.
Retail Business Boosting Profits
The profitability of Amazon's retail business stood out to analysts following Amazon's fourth-quarter earnings report. Operating income from Amazon's North America retail division generated $6.5 billion in operating income during the December quarter, compared to a $240 million loss a year earlier.
Sales for the division climbed 13% to $105.5 billion.
Jassy said a restructuring of its U.S. fulfillment network has made delivering products more efficient.
"In addition to the strong top line growth, which helped to drive improved leverage throughout our businesses, we continue to make progress on reducing our cost to serve," Jassy said on the company's earnings call. "The fourth quarter is our busiest time of year, supported by an increasingly large and integrated operations network."
A booming business selling advertisem*nts within Amazon's website, apps and streaming channels is also boosting margins. Advertising sales grew 27% year over year to $14.7 billion. Ads are the company's fastest-growing segment.
Evercore ISI analyst Mark Mahaney noted that this quarter marked Amazon's highest-ever operating income.
"Three fundamental catalysts are playing out," Mahaney wrote to clients following the report. "AWS growth is accelerating, the North American Retail segment is ramping to record-high operating margins, and the company as a whole is ramping to record-high free cash flow margins."
Amazon Stock: AWS Growth Accelerates
Amazon's earnings also eased some concerns about its profit-driving cloud-computing business.
The 13% year-over-year sales growth for Amazon Web Services marked an improvement from a 12% growth rate for the division in the third quarter. Analysts have been looking for signs that AWS could reaccelerate sales after a slowdown for growth last year.
AWS is the top cloud provider by market share, providing cloud computing power and storage to millions of business. It also provided two-thirds of Amazon's $37 billion in operating income for 2023.
But investors have been watching the business with some concern since early last year. For one, revenue growth has slowed as companies cut back on some computing costs.
Plus, there are the concerns Amazon is not positioned as well as Microsoft to win generative AI business.
Heading into Amazon's fourth-quarter report, Piper Sandler analyst Thomas Champion wrote in a client note that 70% of the questions he was hearing from investors were about AWS.
But, as Champion wrote to clients following the report, AWS' growth for the fourth quarter "hit the bullseye."
Will Regulators Take A Bite Out Of Amazon Stock?
Meanwhile, Amazon is staring down what is likely the biggest legal fight in its 30-year history. Regulators are challenging Amazon's market power and the company likely will grapple with intense scrutiny in the coming years.
Amazon's regulatory problems came into sharp focus on Sept. 26 when the Federal Trade Commission and 17 state attorneys general filed a major antitrust lawsuit against Amazon.
The FTC accuses the company of using its market power to inflate prices and overcharge merchants. Amazon rejects the allegations, arguing that the FTC is "wrong on the facts and the law, and we look forward to making that case in court," the company said in a statement.
In an Oct. 3 client note, JPMorgan analyst Doug Anmuth said the lawsuit "was very much as expected, and we believe it will be challenging to prove that AMZN illegally maintains monopoly power."
Technical Analysis Of Amazon Stock
Amazon stock's technical ratings are strong following back-to-back earnings reports that topped expectations.
The IBD Stock Checkup tool shows Amazon stock with a Relative Strength Rating of 91 out of a best-possible 99, indicating the stock has outperformed most of the market over the past 12 months.
Amazon stock also holds an IBD Composite Rating of 94 out of a best-possible 99. The score means AMZN stock currently tops 94% of all other stocks in terms of key performance metrics and technical strength.
Further, Amazon stock holds an Accumulation/Distribution Rating of C. That rating analyzes price and volume changes in institutional ownership for a stock over the past 13 weeks. The current rating indicates roughly equal buying and selling by institutions.
Even with the recent slide, Amazon stock is extended well beyond its most recent 145.86 buy point from a consolidation pattern, according to IBD MarketSurge.
Here is a guide to understanding IBD's rating system.
Amazon Market Cap
You can check for Amazon's current stock price here. Amazon's market cap is $1.87 trillion, as of mid-day April 26. Here is how the stock has grown over time:
| Time Period | AMZN Stock % Gain | S&P 500 % Gain |
|---|---|---|
| 2024* | 18 | 7 |
| 2023 | 81 | 24.2 |
| 2022 | -49.6 | -19 |
| 2021 | 2.4% | 27 |
| Since 1997 Amazon IPO* | 199,194 | 511 |
*Prices as of mid-day April 26.
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