Amazon (AMZN) stock is up 37% this year, with much of its gains coming on April 24, when shares soared 14% after Amazon’s uncharacteristically strong first-quarter. But don’t discount the role of the analysts in the AMZN stock rally.
In stark contrast to the “enough is enough, time to make some money” attitude Wall Street had with AMZN in 2014, analysts are singing a much different tune.
By the end of 2014, AMZN missed earnings per share expectations for six consecutive quarters, and the stock was down 22% for the year.
Now, after Amazon’s blowout first-quarter earnings report, the Seattle-based e-commerce giant has beaten or matched EPS expectations for two straight quarters. That’s because certain parts of its business are really starting to heat up — and analysts have taken notice.
AMZN: A Sway of Sentiment
Oppenheimer on Monday raised its AMZN stock price target to $525 from $415, maintaining an “outperform” rating on shares. But it’s certainly not the only research firm getting more bullish on AMZN this earnings season:
- JPMorgan upgraded AMZN to “overweight” from “neutral” and boosted its price target from $375 to $535.
- UBS increased its AMZN price target from $355 to $450.
- RBC Capital Markets boosted its AMZN price target from $400 to $500.
- Pivotal Research Group reiterated its AMZN stock price target of $640.
- Deutsche Bank raised its price target from $410 to $500.
- Cantor Fitzgerald hiked its AMZN price target from $385 to $460.
- Axiom Capital raised its PT from $434 to $460.
You get the idea. Wall Street is starting to see something beautiful in Amazon: the cloud.
Amazon Web Services: Unlocking AMZN Growth
For the first time ever, Amazon broke out the numbers of Amazon Web Services (AWS) in its most recent quarter. Investors have long known about AWS, which is the most dominant cloud-computing web services suite out there.
Cloud computing isn’t exactly an obscure industry with a dearth of competitors, either. IBM (IBM), Google (GOOG, GOOGL), Microsoft (MSFT), Oracle (ORCL) and others are all trying to keep up with AWS, but to no avail.
And while AMZN CEO Jeff Bezos has a bad rep on Wall Street for his “spend first, ask questions later” philosophy, that exact mentality is starting to pay off, as investments in AWS have helped the company build a nearly insurmountable lead in cloud computing.
In a recent deep-dive article on Amazon’s cloud power, InvestorPlace Contributor Greg Gambone puts it into perspective, with a little help from Bezos himself:
“Bezos attributed the impressive success of the Amazon cloud business to ‘two seemingly contradictory traits: impatience to deliver faster and a willingness to think long term.’ He described AWS as ‘a good example of how we approach ideas and risk-taking at Amazon.’ Indeed, those risks have paid off over the past 10 years since the launch of the Amazon Web Services business, and AMZN shareholders have been well rewarded.”
Yes they have. And with AWS revenue growing by 49% to $1.57 billion in the first quarter and the division’s operating margins near 17%, expect AWS’s contribution to the bottom line to keep growing — and for analysts to keep raising AMZN stock price targets, of course.
As of this writing John Divine was long shares of GOOG stock and GOOGL stock. You can follow him on Twitter at @divinebizkid or email him at editor@investorplace.com.
