This could be the next catalyst for e-commerce powerhouse Amazon - CFRA
Analysts at CFRA Research told investors in a note Wednesday that they believe $7 or more earnings per share could be the next catalyst for Amazon (NASDAQ:AMZN) stock.
The firm explained that with Amazon's rapidly growing profits and free cash flow, they believe more attention will be paid to traditional financial metrics, such as net income and EPS, as opposed to more nontraditional metrics like EBITDA.
«At CFRA, we currently value AMZN shares using an EV/EBITDA relative valuation, as it ignores certain non-cash expenses, as well as AMZN's quarterly mark-to-market adjustment related to its equity stake in Rivian (NASDAQ:RIVN) Automotive,» the firm explained. «Our current 12-month price target of $180 is calculated using an EV/EBITDA multiple of 15x against our 2024 adjusted EBITDA estimate of $132.2 billion (+24% Y/Y).»
CFRA explains it performed a scenario analysis using a more conventional P/E relative valuation against its 2025 adjusted EPS estimate of $7.28 and that its base case calculates a $182 target price, which represent a potential 30% upside. In addition, its bull case calculates a $240 target price, representing about a 70% upside.
«We believe AMZN has many levers to grow operating profits and margins over the next several years, driven by e-commerce efficiencies (both U.S. and international), as well as faster growth in higher-margin revenue streams (e.g., third-party seller services, advertising, and Amazon Web Services [AWS]),» said analysts at CFRA.
Within the e-commerce business, CFRA says AMZN is still in the early stages of a broader efficiency initiative, while they expect services revenue streams to grow faster than product revenue streams over the next several years.
Read more on investing.com
