Investing.com — BMO Capital raised its target for Amazon (NASDAQ:AMZN) to $265 from $236 in a note Friday, citing a robust outlook for Amazon Web Services (AWS) and continued growth in retail and advertising. The firm reiterated its Outperform rating on the stock.
BMO anticipates AWS growth to accelerate in 2025, projecting a 20% increase compared to the prior estimate of 17%.
“We anticipate accelerating 2025E AWS growth of 20% vs. prior 17%, as Bedrock continues unlocking existing IT spending and incremental AI workloads,” BMO stated.
The firm noted that AWS CEO Matt Garman emphasized the potential for significant cloud adoption among AWS’s largest customers, many of whom currently have only 10-40% of their workloads in the cloud.
Garman suggested there is visibility for this figure to rise to 70-80%, driven by ongoing innovation.
“ Telco and Healthcare have yet to meaningfully shift workloads to the Cloud, offering significant upside from current customers,” added BMO Capital.
The firm’s channel checks are said to indicate AWS growth for 2025 could approach the low 20% range, prompting an increase in their growth estimates for 2025 and 2026 to 20% and 17%, respectively.
“Cloud migrations remain solid while Bedrock’s optionality is onboarding incremental AI workloads,” BMO noted.
On the retail front, Amazon’s Same-Day/Next-Day delivery services are expected to boost frequency growth and free cash flow potential. “With Same-Day/Next-Day volume up 30% year-over-year through July, Amazon is on pace to deliver +10B items at unmatched speed,” BMO wrote.
The firm also raised its ad revenue estimates following the successful launch of Sponsored TV, projecting $63.6 billion in 2025 and $70.3 billion in 2026. “Our experts highlight the strong adoption of Prime Video ads in 2H24E,” BMO commented.
Given these factors, BMO has adjusted its operating income forecasts for 2025 and 2026 to $80.4 billion and $95.8 billion, respectively.
