February 2, 2018 / 1:32 PM / 5 months ago

Wall Street adds more fuel to Amazon share rally after stellar results

Feb 2 (Reuters) - Amazon.com Inc’s shares rose 6 percent on Friday as Wall Street analysts rushed to raise their price targets on the stock after blockbuster results, moving the ecommerce giant closer to a trillion dollar market valuation.

At least 13 brokerages raised their price targets on the stock, highlighting the company’s growth potential from rising global Prime subscriptions and a market-leading cloud business.

Analysts at Jefferies, Wedbush and Credit Suisse were the most bullish, boosting their price targets to $1,750. At that price, Amazon stock will be worth about $850 billion.

Apple Inc, the world’s most valuable listed company, was worth $861 billion as of Thursday’s close.

Amazon’s fourth-quarter revenue jumped 38 percent to $60.5 billion on strong holiday sales, and net income more than doubled to $1.86 billion.

The company’s revenue has been growing at a scorching pace as shopping has moved online and businesses are shifting their computing operations to the cloud, where Amazon Web Services (AWS) leads the market.

AWS, which competes with Microsoft Corp’s Azure and Alphabet Inc’s Google Cloud platform, reported a 45 percent rise in revenue to $5.1 billion in the quarter, giving the business an annual run rate of over $20 billion.

“AWS is still adding more incremental dollars than all public cloud competitors combined,” Barclays analyst Ross Sandler said.

The high-margin business, which accounts for a significant chunk of Amazon’s operating profit, has been supplying the cash for the company’s investments and supporting razor-thin margins in its retail business.

Amazon’s earlier investments in warehouses yielded results for the company as lower shipping cost boosted its quarterly operating margin to 3.5 percent - its highest fourth-quarter margin since 2010, analysts said.

The company has been investing heavily on simplifying logistics for retail, creating original shows to keep Prime customers hooked and making its Alexa-based devices more user friendly.

Amazon is also expanding into newer markets such as Australia and Brazil to increase its total addressable market (TAM), and adding more retail categories such as grocery and potentially, healthcare.

“We believe that while margins will be impacted by lumpy investments, Amazon has been building up momentum and expanding the TAM which should continue to drive elevated top line growth in the mid term,” Deutsche Bank Lloyd Walmsley said.

Wall Street analysts are overwhelmingly bullish on the stock with 46 of 50 brokerages rating it “buy” or higher, three “hold” and only one “sell”. Their median price target is $1,580.

Amazon’s shares were up $80 at $1,470 in trading before the bell. The stock hit the $1,000-price mark in May in 2017 and have risen 67 percent in the last 12 months. (Reporting by Supantha Mukherjee, additional reporting Sonam Rai in Bengaluru; Editing by Saumyadeb Chakrabarty)

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