Investing.com -- Phillip Securities downgraded Amazon (NASDAQ:AMZN) from Buy to Accumulate in a note Monday, citing recent share price strength despite solid earnings performance.
The firm also raised its discounted cash flow (DCF) target price to $270, up from $240.
“Due to recent share price strength, we downgrade our recommendation from Buy to Accumulate and raise our DCF target price,” wrote the firm.
In its latest note, Phillip Securities highlighted that Amazon’s fourth-quarter revenue met expectations, while profit after tax and minority interest (PATMI) exceeded forecasts due to higher operating leverage and disciplined cost management.
The firm noted that Amazon’s full-year revenue and PATMI reached 100% and 112% of its FY24 estimates, respectively.
Amazon Web Services (AWS) remained the primary growth driver, with a 19% year-on-year revenue increase. AWS operating margin expanded by 7.3 percentage points to 36.9%, supported by cost efficiencies and an extended server lifespan, which contributed to a 200-basis-point margin expansion.
Looking ahead, Phillip Securities rolled forward its valuation model but made a slight 1% reduction in its FY25 revenue and PATMI estimates. This adjustment reflects factors such as the leap-year effect, changes in the useful life of services, and an increase in the useful life of heavy equipment.
Despite the downgrade, Phillip Securities remains positive on Amazon’s long-term positioning in generative AI and cloud migration trends.
The firm stated, "We believe AMZN is well-positioned in generative AI and should benefit from cloud migration as it is still in the early stage."