There's a silver lining in Amazon's slowing AWS growth
While Amazon has given back a chunk of its early gains, it's still up 1.7% at $933.50 a share as of 1:05 p.m. ET. The company reported better than expected earnings and revenue following Thursday's closing bell.
Amazon earned an adjusted $1.48 per share, well ahead of $1.07 that Wall Street was expecting. Its revenue of $35.71 billion edged out the $35.3 billion that was anticipated.
In a note sent out to clients on Friday, Credit Suisse analyst Stephen Ju raised his price target for Amazon from $1,050 to $1,100, implying an upside potential of almost 18%. He maintained his "Outperform" rating on the stock.
Additionally, Ju reminded investors that Amazon is much more than a retailer, and that it owns one of the world's biggest cloud computing providers, Amazon Web Services. He said that while AWS growth is slowing, it's still going strong.
Amazon reported $3.7 billion in AWS revenue during its latest quarter, a 43% increase from the same period a year ago. Despite the impressive numbers, growth has now slowed for seven straight quarters.
However, there is an important silver lining with regards to AWS - more people are using it. Here's Ju (emphasis ours):
Ju said that there are three reasons to buy Amazon stock:
- "Re-establishment of e-commerce segment operating margin expansion as Amazon grows into its larger infrastructure."
- "Ongoing margin benefit due to shipping loss moderation."
- "Upward bias to AWS revenue forecasts and likely more moderate deceleration path as suggested by ongoing capital intensity in the business."
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