Mizuho Increases Amazon Price Target

Mizuho has raised its price target for Amazon (NASDAQ:AMZN) from $240 to $260, highlighting the opportunities in generative AI (GenAI) applications as a key factor.

In a note released on Tuesday, Mizuho discussed how Amazon Web Services (AWS) showcased innovations at the AWS re:Invent 2024 aimed at overcoming challenges in deploying GenAI solutions, setting the groundwork for significant growth in FY25.

Focus Areas for AWS

Mizuho identifies three major areas of focus for AWS:
– Reducing Costs: The new Trainium2 chip aims to cut capacity costs by 40%, allowing for more affordable scaling of GenAI.
– Simplifying App Development: The Bedrock platform offers tools to automate coding, data integration, and model selection, speeding up the app development process.
– Advanced AI-Agent Functionalities: AWS is enhancing workflows in sectors like loan underwriting by utilizing foundational models with improved reasoning and context processing.

Mizuho anticipates that as more use cases move into production, the volume of inferencing will increase through app development and usage in FY25. This trend supports their thesis on the consumption multiplier effect of GenAI.

Revised Revenue Growth Forecast

Due to the consumption multiplier effect, Mizuho has adjusted its FY25 AWS revenue growth prediction from 19% to 21%.

The firm maintains a positive outlook on the overall cloud computing sector, keeping Outperform ratings for Amazon, Microsoft (NASDAQ:MSFT), and Alphabet (NASDAQ:GOOGL). Analysts at Mizuho believe that AWS's advancements position it to lead in GenAI, capitalizing on the growing demand as enterprises adopt these technologies.