Amazon.com has emerged as the standout performer among big U.S. technology companies during this earnings season. Analysts believe that this momentum will continue in the coming months.
One of the key factors contributing to Amazon's success is the improving trends for Amazon Web Services (AWS), its cloud-computing unit. Analysts have identified this as a major reason to be optimistic about the company's future growth.
According to UBS analyst Lloyd Walmsley, Amazon's second-quarter performance was an inflection point that could lead to sustained growth in its shares. The company exceeded expectations in three areas - retail revenue, AWS revenue, and margins. Additionally, the management's tone during the call indicated that there is still more to come in terms of retail margins and AWS acceleration.
As a result of these positive indicators, Walmsley has named Amazon as UBS's top pick in the entire Internet sector. He believes that AWS is on the verge of a new phase of demand driven by generative artificial intelligence, while retail margins are expected to continue improving into the next year. Walmsley has raised his target price for Amazon from $150 to $175 and reiterated a Buy rating on the stock.
During premarket trading on Friday, Amazon's shares saw an 8.8% increase, reaching $140.29. This year alone, the stock has risen by 53% as of Thursday's close. The strong second-quarter earnings report and guidance have contributed to this surge in share value.
Furthermore, Amazon's e-commerce business has also shown promising growth with revenue increasing at an accelerated rate. The company's margins in this sector have also expanded, garnering attention from Citi analysts. They have raised their target price for Amazon from $145 to $167 and maintained a Buy rating on the stock.
Citi analysts are confident that AWS growth remains stable and that Amazon's e-commerce operations will continue to improve, positioning the company for even greater margin expansion. Therefore, they consider Amazon shares as one of their top picks.
Overall, Amazon's impressive performance in various sectors, coupled with positive analyst outlooks, indicates that the company is well-positioned for future success.