HSBC Global Research believes that the growth opportunities at Amazon Web Services (AWS) could exceed the upside potential of Amazon.com’s flagship e-commerce business. Analyst Christopher Johnen has recently started coverage on Amazon stock (ticker: AMZN) with a Buy rating and a price target of $160, implying a 15% increase from the stock’s closing price on Wednesday.
The Power of AWS
Johnen's confidence in the stock primarily stems from AWS, which he refers to as Amazon's "crown jewel." Investors are specifically looking for AWS growth to reaccelerate. While customer efforts to cut back on costs remain a headwind for AWS, the company has experienced sales growth pick back up, as stated by Chief Financial Officer Brian Olsavsky during the third-quarter earnings call in October. Olsavsky also mentioned that the rates of cost optimizations are expected to slow down, putting Amazon in a good position to drive future growth.
A Temporary Slowdown
Johnen reassures investors that the concern about Amazon's slowing growth, particularly at AWS, is not permanent but rather driven by the broader economic environment. He encourages investors to have confidence in the long-term growth opportunity presented by the secular shift into the cloud.
In conclusion, the growth prospects at AWS could surpass those of Amazon's e-commerce business. With a Buy rating and a price target of $160, HSBC Global Research recognizes the potential for a 15% increase in Amazon stock. Despite a temporary slowdown, AWS remains Amazon's "crown jewel" and is expected to reaccelerate in the future.
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