- Pivotal sees stock hitting $260 in 2025
- Datacentres, cloud services and AI major drivers
- Truist recently upped its own target price to $265
Analysts at Pivotal Research have started coverage of Amazon (AMZN:NASDAQ) and see up to 40% upside from the stock thanks to the tech giant’s strong organic growth potential and its robust multi-sector market position.
In a note to clients, the Canadian research house flagged Amazon’s broad expansion opportunities, particularly driven by its cloud services division, Amazon Web Services, which they predict will grow from 17% of total revenue in 2024 to over 35% within the next five years.
This substantial growth is expected to be fuelled by the increasing adoption of cloud technologies, particularly as AI (artificial intelligence) capabilities continue to expand across industries. Last month (10 Sep), Amazon confirmed plans to invest £8 billion over the next five years in the UK, building, operating, and maintaining its vast estate of datacentres.
BEYOND THE CLOUD
But Pivotal also believes that there is substantial growth scope beyond cloud services, pointing out that Amazon has vast potential to grow its e-commerce and retail businesses by leveraging its infrastructure to expand into new markets, especially in sectors like grocery and pharmacy.
The company’s international footprint is also expected to expand, along with improvements in delivery speeds and fulfillment operations. Amazon’s advertising business, which is already the third largest globally, is projected to capture more market share, further diversifying its revenue streams.
New revenues streams from technologies like robotics, AI, and autonomous vehicles are also part of Pivotal’s bold analysis of the company and its stock. Analysts at Pivotal argue that these emerging technologies will not only support operational efficiency but could also lead to margin expansion over the next five years, driving operating margins up from the current 10% to approximately 20% by 2029.
WHAT COULD GO WRONG?
Despite the bullish outlook, Pivotal also warned of several risks that could affect Amazon’s trajectory. These include regulatory pressures, as the company faces potential antitrust actions, and concerns that Amazon may lag competitors in AI development.
Additionally, the Kuiper satellite project, aimed at providing global internet coverage, poses a financial risk, although it is seen as a long-term bet that could enhance Amazon’s logistics and retail capabilities.
Pivotal values Amazon using a discounted cash flow model, forecasting a 30% annual growth in free cash flow per share, supported by strong growth in AWS and advertising.
The brokerage has set a year-end 2025 price target of $260 for Amazon’s stock, reflecting confidence in the company’s ability to sustain its market leadership while expanding into new high-growth areas.
At the weekend, analysts at Wall Street broker Truist upped their own price target on Amazon to $265, reflecting its resilient consumer demand and robust growth in various business segments. This compares to a consensus stock target of $220, according to data from Koyfin.
