What all this means is that Amazon has deep pockets and plenty of resources to expand and modernize both its e-commerce and cloud computing activities. The company is doing just that, and making heavy use of AI while doing it.

On the retail front, Amazon is using AI to improve its customer interfaces. The company has introduced an artificial intelligence shopping assistant to smooth the process of searching the retail database to find exactly the right product at the right price and is already using AI to improve its advertising activities in line On the cloud side, Amazon is integrating AI capabilities and tools into the AWS platform and is working with AI development firm Anthropic to build generative AI models for Bedrock, its own cloud AI platform. ‘Amazon. In addition, Amazon, under the aegis of AWS, is developing and releasing a family of semiconductor chips, Trainium, designed specifically for training AI and natural language systems.

Ultimately, all of this has made Amazon hugely profitable. The company reported earnings of $1.43 per share in 3Q24, which was 29 cents better than forecasts. Additionally, Amazon shares are up 49% over the past 12 months, outpacing the NASDAQ’s 31% gain by a wide margin.

Checking in with analyst Khajuria and Wolfe’s view, we find her bullish on Amazon, specifically citing the company’s strengths. Khajuria writes: “We named AMZN a top pick at the time of our release on July 24, and we remain constructive on it based on our three-pronged thesis: i) Upward retail margins driven by operational efficiency gains, automation, ad revenue growth and sustainable international profitability; ii) Healthy and sustainable AWS revenue growth in the HT% range driven by the demand for AI-based workloads and inference, Trainium and Anthropic chips; iii) Consolidation of market share driven by fast delivery speeds and availability of non-discretionary items.

Based on this position, Khajuria puts an outperform (ie, buy) rating on AMZN stock. This is complemented by a price target of $270 implying a one-year upside potential of 21%. (For history of Khajuria, click here)

Overall, this megacap e-commerce giant has earned a consensus rating of Strong Buy from The Street, based on 47 recent analyst reviews that show an unbalanced split of 46 Buys to just 1 Hold. The stock is priced at $222.11, and its average price target of $249.62 suggests it will gain 12% next year. (See AMZN Stock Forecast)

Metaplatforms

The second stock we’ll look at here today is Meta Platforms, the world leader in social media and the parent company of Facebook, along with Instagram, Messenger and WhatsApp. Meta’s family of social apps had a collective DAP, or daily active people, of 3.29 billion as of September 2024, meaning this company can effectively reach 41% of the world’s population. That’s a huge number and highlights just how effective Mark Zuckerberg’s company has been in turning social media into a global force.

Meta has used its unprecedented reach to support its revenue-generating activities, primarily digital advertising. The company’s huge audience gives it access to a huge well of data, which can be used to fine-tune online ad campaigns or simply sell to advertisers. In its latest quarterly report, covering 3Q24, Meta reported an 11% year-over-year increase in the average price paid per ad on its platform. This strong metric helped boost the company’s total revenue for the quarter to $40.59 billion, beating the forecast by $280 million, while growing 19% year-over-year. Meta shares, like Amazon’s earlier, have outperformed the broad markets by a wide margin, gaining 73% over the past 12 months.

That Meta is successful is beyond doubt. The company has achieved this success by adapting to changes in the digital landscape, some of those changes brought about by the very social media revolution it helped start. A good example is the company’s reaction to the force of Twitter, or X, as owner Elon Musk has renamed it. Meta developed its own thread-based app, aptly named Threads, which it launched in July 2023 as a competitor. Although Threads has not yet reached the popularity of X, it has reached the milestone of 200 million active users.

Meta may also benefit from a Congressional law that was upheld at the federal appeals level last month. The act orders Chinese company ByteDance to divest itself of the popular social video app TikTok, if it wants to keep the app available in the US. If the Chinese company doesn’t comply, TikTok risks being banned from US internet providers. While enforcing such a ban would be difficult at best, the prospect of it may give Meta a boost. Meta has developed several social video apps of its own (Reels and Stories on Facebook) and is well-positioned to grab a big chunk of TikTok’s 170 million audience if the Chinese app faces a ban.

The upshot of all this is that while Meta may be the “old man” of the rapidly evolving social media world, it’s hardly dying. The company is smart and adaptable, and has proven to be able to meet changing conditions while achieving solid profits. Its 3Q24 earnings number was $6.03 per share, beating forecasts by 74 cents and growing 37% year over year.

For Wolfe’s Khajuria, the key here is that Meta’s combination of social apps, its strength in video apps and its ability to meet changing conditions make the company a “superior choice.” As she says, “We remain constructive despite the significant outperformance of the past two years, given our view that Street estimates offer an upside. Our Thesis: i) We believe video unification remains undervalued based on our detailed analysis, we forecast upside through 2025. by MSD $B; ii) We pamper Threads opportunity as potential to add LSD $B with monetization from ’25; iii) TikTok divestiture remains uncertain, but if this happens, we see 8-10% EPS upside; iv) A cleaner AI narrative as multi-year investments are better positioned to show ROIC potential.”

In summary, Khajuria puts an Outperform (i.e. Buy) rating on Meta, and backs it with a $730 price target, showing his confidence in a 16% upside potential over the next 12 months.

Meta has 43 recent analyst reviews on record, breaking down into 39 buys, 3 holds and 1 sell. The stock is currently trading at $617.89 and the average price target of $683.72 implies a potential one-year gain of 10.5%. (See META inventory forecast)

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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.