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The rise of OpenAI’s ChatGPT in late 2022 sent shockwaves through the artificial intelligence (AI) space, making traditional voice assistants like Amazon’s (AMZN) Alexa seem outdated overnight. Once a leader in smart voice assistant technology, Alexa struggled to keep up as ChatGPT wooed the world with its ability to generate stories and write complex codes. Feeling the pressure, Amazon has spent years retooling Alexa with generative AI capabilities, setting the stage for a long-overdue transformation.
And finally, on Feb. 26, Amazon unveiled “Alexa+,” a next-generation AI assistant packed with advanced features. This is also the first time Alexa comes with a price tag. Rolling out in early access this month, Alexa+ will cost $19.99 per month, though Amazon Prime members will get it for free. This upgraded version isn’t just a voice assistant. It can now book reservations and cab rides, order groceries, buy concert tickets, and even tailor recipe suggestions to specific household members.
Alexa+ can also read study guides and quiz users, as well as organize handwritten documents with memory recall capabilities. “She’s smarter than she’s ever been before, but she’s also approachable,” said Panos Panay, Amazon’s senior vice president of devices and services. So, with Alexa finally stepping into the world of generative AI, should investors buy, sell, or hold AMZN shares now?
About Amazon Stock
While Seattle-based Amazon (AMZN) needs no introduction, its evolution from an e-commerce giant to a tech powerhouse is nothing short of remarkable. Beyond online shopping, Amazon has its fingerprints on everything from cloud computing and AI to data centers and digital entertainment. With Prime Video, Music, Gaming, and Twitch, it dominates the streaming world, while Amazon Web Services (AWS) stands at the forefront of the cloud and AI revolution, fueling the explosive demand for next-gen technologies.
With a towering market cap of around $2.2 trillion, AMZN continues to flex its dominance on Wall Street. Over the past year, shares of this mega-cap powerhouse have surged nearly 17%.
AMZN stock might not scream bargain at first glance, trading at 33.1 times non-GAAP forward earnings, well above the sector median of 16.04x. But while its valuation surpasses industry peers, it’s dramatically lower than Amazon’s own five-year average of 176.6x, making it look far more reasonable than historical levels.
Amazon Beats on Q4 Earnings
The e-commerce behemoth published its 2024 fourth-quarter earnings report on Feb. 6, beating Wall Street’s expectations on both the top and bottom lines. Revenue surged 10% year-over-year to $187.8 billion, edging past analysts’ estimates of $187.2 billion. A booming holiday retail season helped fuel the strong results, reinforcing Amazon’s dominance in e-commerce and beyond.
The company delivered a knockout bottom-line performance in the final quarter of 2024, with EPS soaring 86% year over year to $1.86, crushing Wall Street’s estimates by a hefty 22.4% margin. The company’s profit surge was fueled by aggressive cost-cutting and the unstoppable momentum of its high-margin AWS business. As a result, Amazon’s operating margin jumped to 11.3%, a sharp climb from 7.8% a year ago, showcasing its ability to drive efficiency while scaling growth.
Amazon’s latest earnings breakdown also highlights strong momentum across its core business segments. The North American division led the charge with a solid 10% year-over-year growth, generating $115.6 billion in sales, while the international segment followed suit, climbing 8% to $43.4 billion. Meanwhile, AWS continued to flex its dominance in cloud computing, surging 19% year-over-year to $28.8 billion. Yet, despite these impressive gains, investors weren’t entirely convinced.
Investor jitters over a slowdown in Amazon’s cloud computing growth sent the stock tumbling 4.1% on Feb. 7, despite the company’s overall strong Q4 performance. The disappointment didn’t end there. Amazon’s fiscal 2025 Q1 guidance also fell short of expectations, casting a shadow over its otherwise solid performance. Management projects net sales to range between $151 billion and $155.5 billion for the current quarter, translating to a 5% to 9% year-over-year increase.
What Do Analysts Expect for Amazon Stock?
Despite investors’ lukewarm reaction to Amazon’s latest earnings, Citi isn’t backing down on its bullish stance. On Feb. 27, the investment firm reaffirmed its confidence in Amazon, fueled by the game-changing unveiling of Alexa+. The bank believes this AI-powered upgrade isn’t just a refresh. It’s a strategic push to dominate the rapidly evolving GenAI agent market. According to Citi, AI-driven assistants are reshaping everything from search and shopping to content consumption and travel booking, with competition heating up.
Amazon is stepping up to the challenge, going head-to-head with major players like MetaAI, ChatGPT, Apple’s (AAPL) Siri, and Google’s (GOOGL) Gemini2. Citi pointed to a 20% year-over-year surge in Alexa user engagement across the 600 million Alexa-enabled devices sold to date, signaling strong consumer traction. With Alexa+ expected to drive even higher engagement and transaction volumes, Citi is keeping Amazon on its top-pick list, reaffirming its “Buy” rating and a $273 price target.
Overall, Wall Street appears largely bullish about AMZN stock, with a consensus “Strong Buy” rating. Of the 50 analysts offering recommendations, a solid 45 back it with “Strong Buy,” four give a “Moderate Buy,” and only one maintains “Hold.” The average analyst price target of $269.26 indicates 26.8% potential upside from the current price levels, while the Street-high price target of $306 suggests that AMZN could rally as much as 44.1% from here.
