Amazon is our top internet stock for 2024: Roth

Following the company’s fourth quarter results, Roth MKM analyst Rohit Kulkarni remains positive about the prospects for Amazon (Amazon Stock Quote, Chart, News, Analysts, Financials NASDAQ:AMZN).

On February 1, AMZN reported its Q4, 2023 results. The company posted Net Income of $10.6-billion on Net Sales of $170.0-billion, up 14 per cent over the same period a year prior.

“This Q4 was a record-breaking Holiday shopping season and closed out a robust 2023 for Amazon,” said Andy Jassy, Amazon CEO. “While we made meaningful revenue, operating income, and free cash flow progress, what we’re most pleased with is the continued invention and customer experience improvements across our businesses. The regionalization of our U.S. fulfillment network led to our fastest-ever delivery speeds for Prime members while also lowering our cost to serve; AWS’s continued long-term focus on customers and feature delivery, coupled with new genAI capabilities like Bedrock, Q, and Trainium have resonated with customers and are starting to be reflected in our overall results; our Advertising services continue to improve and drive positive results; our newer businesses are progressing nicely, and along with our more established businesses, collectively making customers’ lives easier and better every day. As we enter 2024, our teams are delivering at a rapid clip, and we have a lot in front of us to be excited about.”

In a research update to clients February 2, Kulkarni maintained his “Buy” rating on Amazon, but raised his price target from $180 to $205.

“AMZN reported an impressive 4Q beat with accelerating trends across all three pillars of Internet, e-Commerce, Advertising & Cloud. 1Q Rev and Op. Profit midpoint guidance came in above expectations, plus we heard encouraging AWS commentary,” the analyst wrote. “While CapEx is set to rise again after declining for two years in a row, we feel confident about our accelerating FCF outlook. Our estimates grind higher, PT goes to $205, implying ~14x ’25E EBITDA. AMZN remains our top Internet idea for 2024.”

Kulkarni thinks AMZN will post EPS of $3.93 on revenue of $627.5-billion in fiscal 2024. He expects those numbers will improve to EPS of $5.00 on a topline of $682.6-billion the following year.

“Our sum-of-parts valuation implies $2.17tn market cap ($810bn for Retail, $980bn for AWS, and $430bn for Advertising/Other), and our $205 PT implies approx. 14x ‘25E EBITDA,” the analyst concluded. “We believe this methodology appropriately attributes value across Amazon’s three business segments with different growth and margin profiles.”