Analysts at Oppenheimer have raised their price target for Amazon noting that the ecommerce giant’s improved gross profit more than offset its slightly lower revenue outlook for its cloud business Amazon Web Services (AWS).
The analysts upped their price target to $130 from $125 and awarded the stock an ‘Outperform’ rating.
They wrote in a note to clients that, despite AWS earnings before interest and taxes (EBIT) being in line with the Street’s expectation, total EBIT beat by 55%, with North America revenue 2% ahead and ecommerce 13% higher than expected.
“[Amazon] cited macro stabilization in established European countries, while modering shipping, diesel and electricity costs contributed to North America EBIT margin upside,” they wrote.
“Management sees long-term EBIT margins surpassing pre-pandemic levels, in North America at 4% to 6% compared to 1Q’s 1.2%.”
Amazon shares had fallen 3.5% to US$106.01 on Friday afternoon. After initially jumping by about 10% following the release of its latest earnings after the closing bell on Thursday, the stock changed course after CFO Brian Olsavsky spoke of declining customer numbers in the AWS segment during Amazon's earnings call.
TickMill Group market analyst James Harte said that investors were clearly shaken by Amazon’s less encouraging outlook.
“With the company undergoing major restructuring, recently laying off around 27,000 members of its workforce, there is clearly a level of uncertainty within the company that is now feeding through into its stock price,” Harte said.
“With this in mind, Amazon shares look vulnerable to a further correction lower near-term.”
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