Amazon.com Inc (NASDAQ:AMZN) has seen its price target boosted by Jefferies analysts ahead of its second quarter earnings report, with the firm pointing to resilient revenues, cost discipline, and stable consumer demand as key growth drivers.
The analysts maintained a ‘Buy’ rating on the eCommerce giant and upped their price target to $265 from $255, representing upside of 17% from Amazon's share price at their time of writing.
Shares traded hands at $234 on Thursday afternoon ahead of Amazon's report.
“Valuation remains attractive at approximately 13x next 12-months EBITDA, an approximately 35% discount to its 15-year average of 20x,” the analysts wrote, arguing that shares still offer compelling upside despite recent gains.
The analysts see room for operating margin upside in the quarter, even as they forecast a modest contraction from the first quarter’s elevated levels.
“We expect resilient operating margins due to ongoing cost discipline,” the analysts wrote, noting that Amazon has kept its retail hiring budget flat and made surgical headcount reductions in non-core areas like books, devices, and services.
Jefferies forecasts Amazon’s second-quarter operating margin at 9.7%, below the Street consensus of 10.4%, but still reflecting “modest overall margin compression” from 11.8% in the prior quarter.
The analysts expect these pressures to ease in the second half of 2025, supported by “a resilient consumer, continued logistics regionalization, and increased automation.”
Amazon Web Services (AWS) is expected to post 17% year-over-year revenue growth in the second quarter, roughly flat compared to the prior quarter, amid ongoing supply constraints.
“AWS still capacity constrained, expect flat growth,” the analysts wrote. “This marks a pause in acceleration, but intra-quarter checks remain positive, pointing to healthy core cloud consumption and a pickup in AI workloads.”
Margins for AWS are projected to decline to 35.5% from a record 39.5% in the first quarter, as Amazon ramps up its investments in infrastructure to support generative AI.
Jefferies remains constructive on Amazon’s core e-commerce business, even as tariff-related concerns have resurfaced. “Consumer spend is generally stable despite concerns over higher prices,” they noted.
They project a deceleration in online store revenue growth from 5% n the first quarter to 3% in the second, largely due to easier year-over-year comparisons, not a change in consumer behavior.
Supporting this view, the analysts cited “encouraging” July Prime Day sales, which grew 30% year-over-year, according to Adobe Analytics.
Prime Day, which spanned four days this year compared to two in prior years, drove more than $24 billion in United States e-commerce sales and was described as “the biggest event ever” by the analysts.
On the advertising front, Jefferies expects a modest deceleration, with Q2 growth expected to be 17% year-over-year, in line with Street expectations.
“Channel checks indicate strengthening demand, particularly for Amazon DSP and Prime Video inventory,” the analysts wrote, adding that advertising remains a healthy growth lever despite a slightly easier comparison base.
- Updated with share price movement -