Amazon's Stock Has Rarely Been This Cheap. Here's Why 1 Analyst Thinks It Could Soar by More Than 50%.

Amazon's Stock Has Rarely Been This Cheap. Here's Why 1 Analyst Thinks It Could Soar by More Than 50%.

  • 16.03.2025 17:57
  • msn.com
  • Keywords: AI, Market Growth

Amazon's stock is trading at its lowest valuation in decades, driven by strong profits from AWS and advertising, with an analyst predicting a potential 50% price surge. Meanwhile, CoreWeave, an AI cloud start-up backed by Nvidia, filed for an IPO but faces risks like high debt and customer concentration, making it a cautious investment choice despite rapid growth.

Amazon ServicesAMZNsentiment_satisfiedNVDAsentiment_neutralMSFTsentiment_neutralGOOGLsentiment_neutral
open_in_newOriginal article

Estimated market influence

Amazon

Amazon

Positivesentiment_satisfied
Analyst rating: Strong buy

Amazon's stock is undervalued, with a P/E ratio indicating it might be a good investment. AWS and advertising contribute significantly to profits.

Scotiabank

Positivesentiment_satisfied
Analyst rating: N/A

Analyst from Scotiabank supports Amazon's price target, suggesting potential growth.

Nvidia

Nvidia

Neutralsentiment_neutral
Analyst rating: Strong buy

Invested in CoreWeave, an AI start-up.

CoreWeave

Positivesentiment_satisfied
Analyst rating: N/A

AI cloud company with rapid revenue growth and potential IPO.

Microsoft

Microsoft

Neutralsentiment_neutral
Analyst rating: Strong buy

Competitor to CoreWeave in the AI cloud market; major customer.

Alphabet

Alphabet

Neutralsentiment_neutral
Analyst rating: Buy

Competitor to CoreWeave in the AI cloud market; mentioned alongside AWS and Azure.

Context

Analysis of Business Insights and Market Implications

Amazon's Stock Valuation and Investment Potential

  • Stock Performance: Amazon (AMZN) is down nearly 20% from its all-time high, trading at a P/E ratio of 35.5x, the cheapest in two decades.
  • Analyst Forecast: Scotiabank analyst Nat Schindler predicts a potential increase of over 50% to $306 within 12 months.
  • Key Drivers:
    • AWS contributes 58% of operating profits with a 37% operating margin, making it the most critical business unit.
    • Advertising revenue grew 18% YoY in Q4, generating significant profits despite lower margins compared to AWS.

CoreWeave: An AI-Backed Cloud Start-Up

  • Rapid Growth: Transitioned from crypto mining to AI cloud services, with revenue surging from $15.8 million in 2022 to $1.9 billion in 2024.
  • Financials:
    • Raised $7.9 billion in debt and spent $8.7 billion on capital expenditures in 2024.
    • Operating income reached $324 million in 2024, despite negative free cash flow of $6 billion.
  • Risks:
    • Over 60% of revenue comes from Microsoft, a competitor.
    • High debt levels and reliance on AI demand growth make the business vulnerable to market downturns.

Conclusion

  • Amazon: Undervalued with strong long-term growth potential driven by AWS and advertising. Investors should consider this as a buying opportunity.
  • CoreWeave: While showing rapid growth, significant risks and financial challenges suggest caution for investors.