Shares of Amazon (NASDAQ:AMZN) spiked to an all-time high, up nearly 4% to $1,880, in early trading Friday. The reason? The e-commerce giant on Thursday reported second-quarter earnings that crushed expectations, and provided a strong operating profit outlook.
Specifically, Amazon posted EPS of $5.07, beating consensus estimates of $2.50 per share. Another figure investors love to watch, revenue from Amazon Web Services (AWS), came in at $6.1 billion, slightly above consensus’ $6 billion estimate. Furthermore, Amazon’s GAAP operating income guidance midpoint of $1.9B was well above consensus estimate of $1.24B.
Amazon’s stunning earnings report left Wall Street analysts rushing to increase their price targets.
Wells Fargo analyst Ken Sena reiterates an Outperform rating on AMZN stock, while raising his price target to $2,110 (from $1,875), which implies an upside of 13% from current levels. (To watch Sena’s track record, click here)
Sena commented, “Amazon reported another very strong quarter with gross profit and CSOI exceeding our expectations by 2% and 40%, respectively. Across its segment detail, top line was strong as well, particularly within its Other (advertising) and Retail Subscription (Prime) businesses. Additionally, 3Q18E margin guidance of $1.4bn – $2.4bn came in ~$900mm ahead of our prior estimate at the midpoint (or 230bps higher on margins). And, as we flow through this quarter’s beat, our 2018E operating income estimate increases 42% to $11.55bn (5% of revenue).”
“The combination of Prime offering more selection, convenience and digital offerings, in addition to Amazon’s leading ability to apply data and compute across a growing number of transaction types leads us to see a large runway ahead. In addition, where AWS and advertising are concerned, we see opportunities for continually higher margin and sustained innovation. As such, given the better margin performance and guide this quarter, we are raising our price target to $2,110,” the analyst concluded.
Another upbeat individual is Baird’s top analyst Colin Sebastian, who reiterates a Buy rating on AMZN shares, and raises his price target to $2,100 from $1,800, writing that “these are the margins you’re looking for.” (To watch Sebastian’s track record, click here)
The analyst added, “[…] the key takeaway was better-than-expected margins/profitability across all segments (North America, Intnernational, AWS); CSOI margin of 8.6% beat 6% consensus. Management cited asset utilization as one driver of margin flow-through (FCs and data centers), while mix of AWS and Advertising benefited the overall bottom line. Looking ahead, we note there may be lumpiness depending on timing of capacity investments.”
As we can see below, AMZN has the Street’s overall seal of approval. The stock has a ‘Strong Buy’ analyst consensus with 34 recent buy ratings vs. just 2 hold ratings. These analysts are projecting (on average) 11% upside potential from the current share price.