Amazon Stock Poised To Reclaim $200 Following Q3 Beat, Retail Mood Upbeat

Amazon, Inc. ($AMZN) reported a double beat for the third quarter on all-around strength, and issued in-line revenue guidance for the running quarter.

Seattle, Washington-based Amazon reported third-quarter earnings per share (EPS) of $1.43 on revenue of $158.9 billion.

The top- and bottom-line results beat the consensus estimates that called for EPS of $1.14 and revenue of $157.28 billion.

Wedbush analyst Scott Devitt attributed the above-consensus revenue to better-than-expected revenue growth in online and physical stores.

Amazon’s public cloud business, the Amazon Web Services (AWS), reported 19% year-over-year (YoY) revenue growth to $27.45 billion. North America sales growth slowed from 11% a year ago to 9% and international sales growth decelerated from 16% to 12%.

The AWS business was a major contributor to the total operating income ($10.4 billion of the $17.4 billion). Devitt noted that Amazon has now reported operating income growth above the high-end of the guidance for the seventh consecutive quarter.

Amazon CEO Andy Jassy said, “We kicked off the holiday season with our biggest-ever Prime Big Deal Days and the launch of an all-new Kindle lineup that is significantly outperforming our expectations.”

“There’s so much more coming, from tens of millions of deals, to our NFL Black Friday game and Election Day coverage with Brian Williams on Prime Video, to over 100 new cloud infrastructure and AI capabilities that we’ll share at AWS re:Invent the week after Thanksgiving.”

For the fourth quarter, Amazon guided to net sales of $181.5 billion to $188.5 billion, which included a 10-basis-point adverse forex impact. This surrounded the consensus estimate of $186.3 billion.

The company expects operating income of $16 billion to $20 billion. Wedbush’s Devitt sees several drivers in place for future margin expansion, including continued cost efficiencies within its fulfillment network as well as the ongoing mix shift towards higher-margin AWS and advertising revenue.

AWS will likely grow 20% YoY growth in the fourth quarter, given the management commentary that the AI business is operating at a multi-billion dollar run-rate, the analyst said. 

The Advertising segment is on track to maintain high-teens growth through 2025, thanks to rising contributions from recent initiatives, including Prime Video ads, he added.

Devitt maintained an ‘Outperform’ rating for Amazon stock and upped the price target from $225 to $250.

The retail community on Stocktwits is largely bullish on Amazon following the quarterly report.

A user on the platform predicted the stock opening at $205 and closing at $215-$220.

Another said Amazon has so much growth potential ahead, with advertising, and Project Kuiper, its low Earth orbit satellite broadband network that aims to provide broadband access to the global community.

As of 8:02 am ET, Amazon climbed 7.16% to $199.74.

Read Next: Apple’s Q4 Beat Does Not Impress Wall Street As Stock Dips In Premarket

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