A pair of Wall Street surveys point to increasing strength on both sides of Amazon ‘s business — more evidence of a cloud-computing comeback and resilient online spending from consumers. Internet analysts at Mizuho Securities said this week they see an “accelerating sales cycle” underway at Amazon Web Services, citing the results of its quarterly AWS customer survey. Spending on AWS in 2024 could grow an above-consensus 20% year over year, analysts said, as their survey indicated companies’ budgets this year are “shifting meaningfully to infrastructure spending.” The analysts, who reiterated Amazon as their top pick, said the company is benefiting from “early exits” of on-premise data center contracts toward cloud-computing deals. Enterprises’ desire to move their data into the cloud for generative artificial intelligence deployment — or optimize their existing data in the cloud for AI — is positive for AWS, according to Mizuho. The firm’s commentary on AWS growth supports our hopeful expectations for the cloud business this year — a key profit driver for the company that faced a slowdown beginning in 2022 as customers reined in spending. Signs of the cloud comeback also were evident in Amazon’s fourth-quarter earnings report , which showed AWS revenue growth finally reaccelerated, up 13% in the three months ended Dec. 31 from a year ago. While Microsoft Azure’s reported 30% year-over-year revenue growth and Alphabet’s Google Cloud posted 26% annual revenue growth during the same period, Amazon’s results nevertheless indicated the softness in cloud spending is rolling over. Amazon said it expects accelerating AWS revenue trends to continue in 2024, which is good news for the stock. “We see less … cost cutting efforts by our enterprise customers,” AWS CEO Adam Selipsky told Jim Cramer recently . “We see a lot of those companies starting to lean back into their core application, core [information technology] estate migrations back into the cloud, and we see generative AI layering in on all of that, so we’re quite optimistic about the future growth potential for AWS.” AMZN 1Y mountain Amazon’s stock performance over the past 12 months. A separate Wall Street survey this week cast in a favorable light the other side of Amazon’s business, its sprawling e-commerce operations. Wedbush Securities analysts said Amazon stands to be the biggest winner from expected growth in online shopping in 2024 — not exactly a surprise, but still a positive for investors. In a poll of more than 1,000 U.S. consumers about their expected spending, Amazon remains the preferred e-commerce destination “by a wide margin.” Roughly 60% of respondents said they planned to spend more at Amazon this year, Wedbush’s survey found, compared with 41% and 21% for Walmart and Target, respectively. International competitors like Chinese online marketplace Temu and discount online retailer Shein have “outpaced some US-based incumbents,” the Wedbush survey indicated. However, the analysts said they believe Amazon is “relatively insulated from emerging competition,” contending the reasons a consumer turns to Temu are “notably different” than their motivations to shop on Amazon. Another encouraging finding in the Wedbush survey: Amazon Prime members said they are seeing “modest improvements” in their experiences, with 39% saying they received an order on the same or next day. That’s up from 32% in Wedbush’s prior survey. Amazon’s ability to enhance delivery speeds underscores the success of its regionalization strategy — a prominent reason for our enthusiasm on its stock. We’re optimistic the e-commerce giant can further optimize those speeds, due in part to the use of AI in the logistics network, while keeping costs under control to help boost profits. While the consumer discretionary sector has pulled back nearly 2% for the week — and a popular retail ETF has fared even worse — shares of Amazon have bucked the trend. The stock has climbed more than 2% this week and set a fresh 52-week high in Friday’s session. At around $185 per share, Amazon is trading less than $2 below its all-time high of $186.57 set in July 2021, during the pandemic-fueled boom times for its business. We have a price target of $190 per share on Amazon and a 2 rating on the stock, meaning we would wait for a pullback before buying additional shares. (Jim Cramer’s Charitable Trust is long AMZN. 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A pair of Wall Street surveys point to increasing strength on both sides of Amazon‘s business — more evidence of a cloud-computing comeback and resilient online spending from consumers.
