Amazon Analyst Predicts Lead in AI Revolution with Strategic Cost Efficiency and Tech Innovations

Needham analyst Laura Martin reiterated Amazon.com Inc AMZN with a Buy rating and a $205 price target.

The analyst raised her fiscal 2024 profit estimates for AMZN, based on CEO Andy Jassy’s shareholder letter promising more cost-cutting at AMZN’s inbound fulfillment architecture and inventory placement during fiscal 2024. 

She also expects fiscal 2023’s cost-cutting actions to drive margin expansion throughout fiscal 2024. 

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For the first quarter of 2024, Martin maintained her revenue estimate at $141.5 billion (up 11% year-on-year) but raised her EBITDA estimate by 12% to $28.8 billion (up 52% year-on-year) and EPS estimate by 20% to $0.83 (up 170% year-on-year).

For fiscal 2024, the analyst maintained her revenue estimate at $636.9 billion (up 11% year over year) but raised her EBITDA estimate by 10% to $132.1 billion (up 22% year over year) and EPS estimate by 12% to $4.13 (up 43% year over year). 

For fiscal 2025, Martin maintained her revenue estimate at $713.4 billion (up 12% year over year) but raised her EBITDA estimate by 6% to $152.3 billion (up 15% year over year) and EPS estimate by 8% to $5.37 (up 30% year over year). 

Martin is more optimistic about AMZN’s ability to outperform other stocks as long as AMZN continues to drive upside to its OIBDA and FCF estimates.

A key topic of conversation with investors Martin spoke to about AMZN is its best-in-class strategic position related to GenAI. AMZN is developing GenAI chips to train and drive better inferences from LLMs (large language models), and it has the widest variety of choices related to LLMs.

This is a unique strategic position, and since digital markets have “winner take most” economics, Martin is optimistic that AMZN will be one of the 2-3 winners from GenAI.

Price Action: AMZN shares traded lower by 1.23% at $179.09 on the last check Thursday.

Amazon Photo by Sundry Photography on Shutterstock