Amazon stock jumped Friday after a second-quarter earnings report that, while missing earnings estimates, beat on revenue across the board.
"Despite inflationary pressures, a tight labor environment, and suboptimal fixed-cost leverage, Amazon delivered strong second quarter results that benefited from elevated levels of consumer demand and better optimization of its fulfillment network," Wedbush analyst Michael Pachter wrote in a note to clients.
Longer-term, he wrote, Amazon should benefit from steady margin expansion driven by the rapid growth of its cloud and advertisement businesses.
Pachter maintained a price target on Amazon stock of 175, with a rating of outperform.
Amazon stock jumped 10.4% to close at 135 on the stock market today.
Making Progress On Controllable Costs
After the market close Thursday, the e-commerce giant reported second-quarter results that showed a 7% jump in revenue to $121.2 billion, beating estimates of $119 billion. It lost 20 cents a share vs. estimates of a 12-cent profit. However, its Amazon Web Services unit topped expectations, as did Amazon's third-quarter outlook.
"Despite continued inflationary pressures in fuel, energy, and transportation costs, we're making progress on the more controllable costs we referenced last quarter, particularly improving the productivity of our fulfillment network," Chief Executive Andy Jassy said in written remarks with the Amazon earnings release.
For its third quarter, Amazon expects net sales in the range of $125 billion to $130 billion. The midpoint is $127.5 billion. The Wall Street estimate calls for $126.5 billion.
Amazon Stock: Relevance Of Value Proposition
"The sales upside illustrated the continued relevance of AMZN's value proposition despite a weakening consumer," Jefferies analyst Brent Thill wrote in his note to clients. "We see a combo of attractive valuation and improving profitability helping deliver second-half outperformance."
Thill raised his price target on Amazon stock to 165, from 150, with a buy rating.
Amazon has been on a roller-coaster ride ever since the pandemic struck in 2020. The company was a huge beneficiary as consumers first hunkered down and relied heavily on home delivery.
As a result, Amazon stock has faced plenty of pain to regain its footing. Negative aftereffects of Covid-19 severely disrupted the company's operations. This included supply chain and worker disruptions, wage increases and higher fuel costs. Further, the war in Ukraine took its toll, as did inflation.
Beneficiary Of Digital Transformation
"In our view, Amazon is well positioned as a key beneficiary of digital transformation," Monness Crespi Hardt analyst Brian White said in a note. However, the economy appears to be in a recession, regulatory headwinds linger, equity markets are tumultuous, and the geopolitical landscape treacherous. We are adjusting our estimates and maintaining our 12-month price target of $172," White wrote.
In addition, Cowen analyst John Blackledge raised his price target on Amazon stock to 215, from 210. He maintained a rating of outperform.
Please follow Brian Deagon on Twitter at @IBD_BDeagon for more on tech stocks, analysis and financial markets.
