Even After a 75% Jump This Year, Amazon's Stock Was Ranked as the Top Pick for 2024

Amazon.com Inc. has experienced a remarkable 75% surge in its shares this year, and according to some Wall Street analysts, the positive momentum is expected to extend into 2024.

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TD Cowen analyst John Blackledge has identified Amazon's stock as his top large-capitalization internet pick for the coming year. He applauds the company's margin trajectory and foresees the potential for a revenue boost within its Amazon Web Services (AWS) cloud-computing unit.

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Blackledge anticipates Amazon to achieve $58 billion in operating income for 2024, largely driven by the high-margin contributions from AWS and advertising. Recent cost-cutting measures may further enhance operating-income momentum across the entire business. Notably, Blackledge's forecast for this metric is 25% higher than the consensus view.

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The analyst believes that Wall Street may not fully appreciate Amazon's advertising opportunity. As the company gears up to introduce ads on Prime Video for all U.S. streaming households next year, with an option for users to opt out of ads for $3 a month, Blackledge estimates a significant potential. He projects that Amazon could generate between $1.5 billion to $3 billion in U.S. ad revenue in the first year, along with almost $800 million in opt-out revenue.

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In terms of AWS, Blackledge sees the cloud business well-positioned to benefit, especially as enterprises move beyond recent cost optimizations and refocus on shifting additional workloads to the public cloud over time. He highlights the potential role of generative AI in driving additional revenue for AWS.

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Blackledge rates Amazon's stock as outperform and has raised his price target from $180 to $200 in his recent note.

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This endorsement of Amazon's positive outlook is echoed by Bernstein analyst Mark Shmulik, who earlier in the week also named Amazon's stock as his best idea. Shmulik views Amazon as offering "quality, long-term growth," with operating income poised for an unprecedented run. His outlook is reflected in an outperform rating and a $175 target price on Amazon shares.

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In Thursday's morning trading, Amazon shares were up by 1.6%, underscoring the ongoing positive sentiment surrounding the e-commerce giant's performance and future prospects.