Last-minute thought: Oppenheimer values ​​Amazon stock before earnings

Amazon (NASDAQ:AMZN) will be in focus today as third quarter earnings season reaches its climax.

Given recent upheavals among major players, including Google and Apple's antitrust woes, investors may be intrigued by Oppenheimer analyst Jason Helfstein's remark that Amazon is the “most controversial large-cap company ahead of third-quarter results.”

Helfstein, who is in the top 4% of TipRanks stock experts, highlights investor concerns about AWS's revenue and margins, possible competitive pressure from Walmart in 3P seller services, and the online store's ongoing revenue and margin challenges Amazon.

Are these concerns justified? Third-party data shows that AWS revenue has actually accelerated in the quarter to date, comfortably exceeding both Oppenheimer and Street's 19% year-over-year growth forecasts, “elevating buy-side expectations.” At the same time, consensus estimates suggest that AWS's core EBIT margins in FY25E (excluding benefits from extended server life amortization) will increase by 163 basis points year-over-year, compared to larger gains of 312 basis points and 474 basis points in the years 2023 and 2024.

Meanwhile, the macroeconomic picture remains “stable”. U.S. retail sales rose 4% in the third quarter, compared to the 3% increase in the second quarter, and “likely stronger than the AMZN forecast.” Additionally, third-party forecasts suggest U.S. online holiday sales will grow 8-10%, with Adobe's forecast suggesting an acceleration compared to 5% growth in 2023.

While investors worry about the costs associated with launching Kuiper, Amazon's satellite internet initiative, Helfstein believes those concerns are “overblown.” The analyst expects Kuiper to cut e-commerce margins by 50 and 60 basis points in FY25E/FY26E, respectively. While the timing and success of satellite launches and regulatory milestones pose some risks, the downside is “quantifiable” as the company has forecast a $10 billion investment during Kuiper's lifetime. For comparison, Starlink is on track to generate $6.6 billion in revenue this year. “We see a significant long-term revenue opportunity,” Helfstein said on the subject, “with a target audience of more than a billion people.”

All in all, Helfstein rates AMZN stock an Outperform (i.e. Buy), while his $220 price target implies the stock will gain 18% in the coming months. (To view Helfstein’s track record, click here)

This is hardly a controversial view of Wall Street; With an additional 45 buy recommendations compared to just 2 hold recommendations, the stock receives a consensus rating of “Strong Buy.” The average target is currently $224.14, which considers a 12-month return of ~20%. (See Amazon stock forecast)

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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is for informational purposes only. It is very important to do your own analysis before investing.