Scotiabank analyst Nat Schindler initiated coverage on Amazon.com, Inc. (NASDAQ:AMZN) with a Sector Outperform rating and price target of $245 per share.

The analyst writes that Amazon benefits from a leadership position across all verticals, especially AWS, where they expect revenue growth to exceed consensus estimates beyond 2025.

The analyst says that AWS's AI business, though early, shows strong demand and is poised for significant growth. Its focus on providing flexible, cost-effective AI solutions positions AWS as a key partner for companies leveraging AI.

Consequently, the analyst expects AWS to maintain ~15% revenue growth with low-30% operating margins beyond 2025.

In the long term, Schindler expects Amazon's Retail business to grow steadily at 5%-10%, though with lower margins. Growth catalysts like healthcare and grocery services could further boost retail numbers, potentially reaching high single digits.

Schindler anticipates an upside in operating income over the next 2-4 years, fueled by macro tailwinds and cost optimizations.

JP Morgan analyst Doug Anmuth says that Amazon remained their top pick.

The analyst says that they are encouraged by strong AWS growth and continued operational discipline across the business.

Anmuth projects operating income of $16 billion in Q4 and $70 billion in 2025, with AWS growth of 20%+ expected to be driven by easing optimizations, workload migrations, and AI monetization.

North America's margins should improve with better shipping, inventory, and automation.

The analyst expects free cash flow at $58 billion in 2024 and $72 billion in 2025, with potential capital returns next year.

The analyst adds that investors expect Q3 net sales of $157 billion—$158.5 billion, AWS growth of 20%- 21%, and operating income of $14 billion—$15 billion+.

Price Action: AMZN shares are up 1.42% at $189.30 at the last check Friday.

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