Actions of Amazon (NASDAQ: AMZN) The stock soared Thursday, gaining as much as 3.8%. As of 3:05 p.m. ET, the stock was still up 2.8%.
There were a pair of catalysts that sent the cloud computing leader higher. The company got some love from Wall Street and Amazon Web Services (AWS) got a new high-profile customer.
A strong and growing dynamic
Cantor Fitzgerald analyst Deepak Mathivanan initiated Amazon stock with an overweight (buy) rating while assigning a $230 price target. For those following the scores at home, that represents a 33% upside potential from Wednesday’s closing price. The analyst cited opportunities in online retail and AWS. Mathivanan believes Amazon has room to expand its retail margins, which will boost earnings. He also suggests AWS growth will continue to accelerate.
The analyst notes that Amazon’s “dominant competitive position in two major consumer and software end markets with its retail and cloud businesses provides ample reason to be optimistic over the next 12 to 18 months.”
The second catalyst was the announcement that the Central Japan Railway Company had selected AWS to scale its operations. The high-speed railway serves 170 million passengers each year. The company will leverage AWS’s Internet of Things, machine learningand generative artificial intelligence (AI) capabilities to help make data-driven decisions, improve operational efficiency and reduce maintenance costs.
Multiple opportunities
By acquiring a major new customer, Amazon appears to be backing up the analyst’s point about AWS accelerating, and he’s clearly done his research. In the second quarter, AWS grew its sales by 19%, marking the fourth consecutive quarter of accelerating year-over-year growth.
Amazon is second to none in digital retail, with revenue of nearly $122 billion in the second quarter. Even a small improvement in the company’s margins would translate into a big increase in profits.
Finally, at around 3 times the sale price, Amazon presents an attractive price, particularly given the multiple growth opportunities.
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