It’s no surprise that Amazon (AMZN:NSD) took a hit in 2022, with the AMZN stock losing 50% of its value during the market rout. But 2023 is off to a much better start, with the stock showing year-to-date gains of 13%. Sachin Mittal – Head of Telecom, Media, and Technology Research of Singapore banking giant DBS – thinks there are enough reasons for Amazon to keep pushing ahead.
Starting with Amazon Web Services (AWS), the segment has remained resilient despite macro uncertainties and is expected to remain the key growth driver, taking a 32% share of the global market. AWS contributed 16% to 3Q22 revenue and represented all the company’s profit, making it the most valuable business for Amazon.
Advertising is another key growth driver, with eMarketer expecting it to account for 7% of global digital ad revenue in 2022. 3Q22 revenue from this segment saw a 25% year-over-year uptick, far outstripping rivals such as SNAP (6%), TWTR (2%), and META (-4%). Mittal believes more advertisers are turning to Amazon’s retail media network to get around Apple’s privacy changes and get closer to shoppers.
The bread-and-butter e-commerce segment is still trying to return to profitability, but with a 38% chunk of the US e-commerce sector, Amazon remains the dominant player and is likely to experience margin expansion.
Mittal rates AMZN stock a Buy and his $124 price target suggest the shares are undervalued by 30%. This bullish sentiment is shared by 39 analysts who have rated the AMZN stock a Strong Buy with an average target of $136.91, indicating potential 12-month returns of ~44%.
All in all, Amazon’s stock may have had a rough ride in 2022, but analysts remain bullish, pointing to the company’s multi-pronged business, including its resilient AWS, booming Advertising and e-commerce segments, as key drivers for growth in the year ahead. With a robust average price target and a hefty return potential, it’s safe to say that AMZN stock could be on the cusp of another bull run in 2023.