Amazon Delivers In A Big Way And Analysts Say There's Even More Upside

Amazon.com, Inc. AMZN is delivering returns to investors even faster than it can deliver stuff to your door.

Amazon's stock was surging Friday as investors responded to the delivery giant's strong fourth-quarter print, sending the company's market valuation above $1 trillion.

Sell-side analysts expected the momentum to continue, with several raising price expectations on the stock, which topped $2,000 after the print.

One analyst said it was time to delete investor concerns from the checkout basket, as the big investments the company made over the last couple of years now appear to be paying off.

See Also: Amazon Blows Away Fourth-Quarter Earnings Estimates; Stock Soars After Hours

The Analysts

Morgan Stanley's Brian Nowak raised the target price from $2,200 to $2,400 and kept an Overweight rating on the stock.

UBS analyst Eric Sheridan kept a Buy rating and raised the price target from $2,305 to $2,440.

Wells Fargo's Brian Fitzgerald kept an Overweight rating on the stock and raised the price target $2,300 to $2,500.

Raymond James' Aaron Kessler maintained an Outperform rating and raised the target price from $2,020 to $2,400.

Stifel's Scott Devitt raised the target price from $2,150 to $2,400 with a Buy rating.

KeyBanc's Edward Yruma kept an Overweight rating on Amazon and raised the target price from $2,200 to $2,400.

Tigress Financial's Ivan Feinseth continues to recommend a Buy on the stock.

Amazon Delivers

The sell-side was pretty much unanimous in praising Amazon's results, appreciating strong holiday sales revenue, Amazon Web Services growth and advertising strength.

The numbers were impressive: total sales of $87.4 billion was up 21% year over year exclusive of foreign exchange, North America retail was up 22% over the year-ago-quarter, and international retail up 15'%. Looking ahead, Amazon's guidance for the first quarter has revenue ahead of forecasts.

"The profits are incredible. Holiday sales were through the roof," said JJ Kinahan, chief market strategist at TD Ameritrade. "The difference is a lot of other retailers had high expectations and didn't quite deliver [on holiday sales] and Amazon had high expectations and delivered. And they painted a good picture of their future revenue. It was a very good report."

Removing Concerns From Checkout Basket

One of the most common refrains - investor concern over investments in shipping and fears around slow AWS growth - should abate.

"Deleting 'investor concerns' from the checkout basket," Sheridan wrote in a note. Amazon had a series of quarters marred by investor fears about its investments in shipping and Amazon Web Services and slowing AWS revenue became a dominant narrative. Not now: "Amazon management checked all the boxes with its Q4'19 EPS report," he said.

Amazon's investment in faster delivery and AWS, along with other layouts in video, Alexa and international sales, should continue through 2020 and strengthen Amazon's platform advantage, added Devitt.

And Yruma pointed out that the profitability signs are even more impressive given that the investment continues. Beyond the much-noted robust holiday sales and the payoff for Amazon Web Services, other lesser-watched parts of the business did well, too.

"Pretty much every aspect of Amazon’s business excelled, including sales of Alexa-powered smart speakers, including in-home and extended to automobiles as well," noted Feinseth, who said there remains further upside in the stock.

See Also: Pro: Investors Overlooking Amazon's Treasure Trove Of Data

Other Reactions

Nowak: Amazon's one-day retail and Amazon Web Services from last year are driving faster growth and profitability while extending the company's ability to invest in new business.

Fitzgerald remains confident in Amazon's ability to penetrate new product categories and locations, keep its lead in cloud computing and that the company has "compelling growth and profit characteristics."

Kessler remains bullish, pointing to continued retail sales and cloud strength, "robust advertising growth," expectations for an improving margin profile in the coming year and beyond as Amazon begins to lap its one-day shipping investments.

How High Can it Go?

Loup Ventures' Gene Munster and Will Thompson noted the company's valuation getting back above $1 trillion, and pointed to how much more market is out there to address, with ecommerce accounting now for only about 15% of global sales.

"Barring a seismic shift in terms of how investors view Amazon’s long-term potential, which we see as unlikely, the company will be rewarded with a rich multiple," they wrote. "So how much is Amazon worth? History would suggest more than $1 trillion."

Amazon's stock was up 9% at publication time Friday to $2,034 per share.