Cramer’s favorite stock of earnings season so far gets new props from analysts
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Amazon is getting the recognition it deserves on Wall Street after a great quarter. The news Morgan Stanley raised its Amazon price target Monday to $230 per share from $210 — implying 16% upside to Friday’s close. The analysts cited the company’s continued strides in lowering costs throughout its retail business. After Amazon reported beats last week on third-quarter earnings before taxes and interest (EBIT) and its Q4 guide, Morgan Stanley analysts raised EBIT expectations for the e-commerce and cloud giant by 10% to $84 billion next year and by 6% to $102.5 billion in 2026. Morgan Stanley is confident in Amazon’s ability to deliver products to Prime members at a lower cost, which is helping to more than offset a dip in margins due to customers’ shifting their purchases to lower-priced essentials. Morgan Stanley expects Amazon’s shipping and fulfillment cost per package to decrease about 3% each year from 2023 to 2026, reaching $6.51 by 2026. While an improvement, this is still a bit higher than pre-Covid pandemic costs of $5.67 in 2018 and $6.06 in 2019. Big picture Amazon’s cost-cutting in its retail business comes as it’s simultaneously investing heavily in meeting demand for cloud computing and AI services within its Amazon Web Services (AWS) unit. The company’s multibillion-dollar investment in AI hardware and infrastructure has been a top-of-mind worry for investors who worry about the company’s profits in the near term, even as the return on investment is expected to grow over time. In a separate note Monday, D.A. Davidson analysts said Amazon, which they rate as a buy, is one of the hyperscalers poised to see the most return on investment from its AI-driven build-out. That’s because, for the first time since AI started booming, Amazon has “now retaken the lead” in outpacing competitors in AI spending growth by redirecting capital from retail to AWS, the analysts wrote. Bottom line Jim Cramer wrote in his Sunday column that Amazon is the “best stock so far” of this earnings season, citing skill execution across all of its businesses. While investments in AWS may have been a cause for concern in near-term profit margins, Amazon’s stellar third quarter gave us immense confidence in management’s disciplined capital deployment toward high-growth AI opportunities, which should allow it to generate substantial returns over time. (Jim Cramer’s Charitable Trust is long AMZN. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
A worker delivers Amazon packages in San Francisco on Oct. 24, 2024.
David Paul Morris | Bloomberg | Getty Images
Amazon is getting the recognition it deserves on Wall Street after a great quarter.