To The Moon

Amazon Bulls Emboldened as Analysts See Revenue Hitting $1T by 2029

$Amazon.com(AMZN)$   bulls are fueling demand call options that could pay off should the stock sustain its rally after 23% gain over the past year.

The stock rose for a third straight day, gaining 1.6% to close at $225.22 Wednesday in New York. The gains have been fueled by mounting optimism over the tech giant's financial prospects as continued investments in artificial intelligence propel revenue growth. 

Analysts, on average, expect Amazon's revenue to climb above $1 trillion by 2029, from $638 billion last year, according to estimates compiled by Bloomberg. Almost a quarter of that forecast total is seen coming from Amazon Web Services, while advertising was forecast to more than double to $120 billion, from last year's level.

"Amazon.com's businesses are flourishing, likely generating record revenue and Ebitda for the foreseeable future,: Bloomberg Intelligence credit analysts Robert Schiffman and Alex Reid wrote in a note Wednesday, referring to the company's earnings before interest, taxes, depreciation and amortization by its acronym. “In the near term, AI demand exceeds capacity, driving larger capital investments.”

Call options that give their holder the right to buy Amazon shares at $240 by the end of next week hold the biggest open interest among contracts tied to the stock. That tally of outstanding contracts has more than doubled to 48,856 call options from just over 19,000 a month ago.

There are other factors fueling the bullish view on the top cloud services provider that's also a market leader in e-commerce. On Wednesday, the company said it will launch pharmacy kiosks at select One Medical offices in Los Angeles starting in December, expanding the reach of Amazon Pharmacy. 

“Amazon's still a small competitor in pharmacy, but it's scaling up, and the opportunity is sizable,” Bloomberg Intelligence industry analysts Poonam Goyal and Sydney Goodman wrote in a separate note. 

The analysts also see robust gains in three categories that account for about half of the company's gross merchandise value: electronics, apparel and home items. “Though electronics has the heaviest penetration, with 52% of industry sales, apparel (at 21%) and home (13%) offer more opportunity,” they said. 

Amazon Prime Day – the company's second sales event of the year, when shoppers are given access to deep discounts – ends today. The revenue from the two-day event could also offer investors a sign of the strength of consumer spending ahead of the holidays. 

While Amazon's gains over the past 12 months outpaced the $S&P 500 Index (.SPX.US)$'s 17% advance, the stock still trailed the 40% advance for the index that tracks the Magnificent Seven stocks. Amazon's 23% gain is behind the 80% advance for $Tesla (TSLA.US)$, 50% for $Alphabet-A (GOOGL.US)$, 41% for $NVIDIA (NVDA.US)$ and 27% for $Microsoft (MSFT.US)$.

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