Goldman Sachs analyst updates Amazon stock price target after earnings

[Wolf]

Amazon shares moved firmly higher in early Friday trading, adding upward momentum to the three major stock benchmarks, after the tech and retail giant's third quarter earnings triggered a host of price target changes from top analysts on Wall Street.

Amazon  (AMZN) , which along with its megacap tech peers is spending billions on new AI technologies and infrastructure, is also seeing expansion in its retail and advertising businesses heading into the final three months of the year, while its powerful Web Services division continues to impress in an increasingly competitive market.

That's allowing investors to feel more confident that its massive capital spending plans, which include a $75 billion outlay this year and even more projects in 2025, can be at least partly offset by improving cash from and profit margins until the AI bets start to monetize.

"We've proven over time that we can drive enough operating income and free cash flow to make this very successful return on invested capital business," Amazon CEO Andy Jassy told investors on a conference call late Thursday.

"And we expect the same thing will happen here with generative AI. It is a really unusually large, maybe once-in-a-lifetime type of opportunity," he added. "And I think our customers, the business, and our shareholders will feel good about this long term that we're aggressively pursuing it."

Amazon CEO Andy Jassy called generative AI a "once-in-a-lifetime type of opportunity" for the tech and retail giant.

Amazon posted overall third quarter revenues of $158.9 billion, an 11% increase from the same period last year that narrowly topped Street forecasts and included 7% gain in retail sales and an a 14% improvement in ad sales.

The group's operating margin improved to 11%, nearly 2 percentage points ahead of the consensus Wall Street forecast, thanks in part to shipping and logistic efficiencies and the group's ongoing cost-cuts.

Margin improvement

Amazon Web Services (AWS), meanwhile, saw revenues rise 19% to $27.5 billion, capping the best quarterly gain in nearly two years, with an operating margin of 38.1%, nearly 5 percent points head of analysts' estimates.

Goldman Sachs analyst Eric Sheridan, who lifted his Amazon price target by $10 to $240 per share following last night's update, said the results gave the bank "increased confidence in our medium/long-term thesis around Amazon’s platform drivers (in both revenue compounding and margin trajectory)."