The recent conclusion of a nine-week winning streak for U.S. stocks, marked by losses in the S&P 500 Index during the first week of 2024, has sparked discussions about the outlook for tech giants that spearheaded the 2023 market rally. Despite concerns about the valuations of tech stocks leaving limited opportunities for investors this year, Amazon (NASDAQ:AMZN) stands out as a top buy for 2024, according to numerous analysts.

In a surprising unanimous move last week, five major brokerages – Piper Sandler, Bank of America, D.A. Davidson, Wolfe, and Wells Fargo – collectively named Amazon as their top pick for 2024. This endorsement is echoed by several other influential institutions, including JPMorgan, Evercore ISI, Citi, TD Cowen, and Bernstein.

This positive sentiment towards Amazon is noteworthy, especially as analysts are becoming more cautious about Apple (NASDAQ:AAPL), which experienced two downgrades in a single week, a rarity for the iPhone maker.

Amazon’s stock for 2024 has garnered a “Strong Buy” consensus rating from Wall Street analysts. Out of the 43 analysts covering the stock, 39 rate it as a “Strong Buy,” while 3 label it a “Moderate Buy.” A solitary analyst has given it a “Hold” rating, and the mean target price of $177.97 is indicative of a 20% increase from current price levels.

When compared to its FAANG peers, Amazon stands out as the most favored by analysts for 2024, while Netflix (NASDAQ:NFLX) receives the most bearish outlook.

Analysts have put forth various reasons for their bullish views on Amazon. Bank of America’s Justin Post anticipates a boost in advertising revenues, contributing 370 basis points to Amazon’s North America margins. Amazon’s foray into an ad-supported Prime plan and potential increases in digital ad spending during the U.S. Presidential elections and the Paris Olympics are seen as favorable factors.

D.A. Davidson’s Gil Luria emphasizes Amazon Web Services (AWS) for enterprise, projecting comparable gains to Microsoft’s Azure in absolute dollar terms. Wells Fargo’s Ken Gawrelski is optimistic about Amazon’s artificial intelligence (AI) pivot, estimating that enterprise AI could constitute 7% of AWS revenues in 2024, with significant growth in 2025 and 2026.

Piper Sandler considers Amazon’s 2024 earnings estimates conservative, pointing to robust retail margins reported by the company. Wolfe’s Deepak Mathivanan also sees potential for further margin expansion.

Despite being the second-best performing FAANG stock in 2023, with an 81% gain, trailing only Meta Platforms (NASDAQ:META), Amazon’s multiples (currently 43.8x next 12-month price-to-earnings) are the highest among its peers. Nevertheless, there is confidence that the stock has room to ascend further. Amazon’s advertising business is growing rapidly, with an annualized run rate of $50 billion, and its business-to-business platform, Amazon Business, presents additional growth opportunities.

The company’s commitment to cost cuts and increased efficiency, highlighted by CEO Andy Jassy, indicates a focus on improving margins. Leveraging its infrastructure more effectively, Amazon aims to grow its bottom line and cash flows at a faster rate than sales growth in the coming quarters.

In conclusion, with a blend of growth, margin expansion, and reasonable valuation multiples, Amazon appears poised for further upward momentum in the market in 2024.

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