Amazon shares surge over 10% higher as analysts applaud earnings result
Daria Nipot

Amazonâs (NASDAQ:AMZN) strong earnings result is set to add billions to the Seattle-based behemothâs market cap on Friday. According to Wall Street analysts largely encouraged by the report, there could be significantly more upside ahead yet.
For its second quarter earnings, AWS acceleration and strong top-line growth overall was the key factor fueling a spike for the stock. Indeed, despite a net loss that reflected continued pressure from the companyâs investment in Rivian (RIVN), a surge in net sales from $14.8B in 2021 to $19.74B for the reported quarter carried optimism forward. Management was also keen to point to historical acceleration during the Great Recession as a lower-cost cloud option to assuage cyclical concerns on the business.
On the back of this strength, analysts reacted overwhelmingly positively to the print, while also highlighting optimism on the companyâs ability to court continued consumer demand and deal with cost increases. For example, Wedbush analyst Michael Pachter reiterated his Buy-equivalent rating and set a lofty $175 price target to the stock.
âDespite 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,â he explained. âLonger-term, Amazon should benefit from steady margin expansion driven by the rapid growth of its cloud and advertisement businesses.â
In terms of the advertising business that saw significant acceleration despite recession fears, Benchmark analyst Daniel Kurnos appraised it as a likely overlooked tailwind set to only accelerate in coming quarters.
âWhat will likely surprise investors was the ongoing strength of Amazonâs advertising unit, which set another record in the quarter and is showing no signs of slowing,â he told clients on Friday. âCompare that with the commentary unfolding across digital and CTV, and the results stand out even more, which we suspect owes to Amazonâs broad-based content strategy and massive data lake.â
Given the levers the company can pull to maintain growth, Kurnos indicated his belief that âdownside potential has been de-risked barring a deep recessionâ for Amazon (AMZN) and any short-term volatility should be ignored as the long-term trajectory remains extremely attractive. He assigned a $160 price target to the stock, also reiterating a âBuyâ rating.
On the consumer end, Truist analyst Youssef Squali cited âthe power of Primeâ as an indication that free and fast delivery, broad selection, and low prices keep subscribers attached to the premium service. That subscription service should keep the company resilient to inflationary concerns as it flexes its pricing power. Given the better than anticipated results overall, Squali hiked his price target to $180 from $175, reiterating a âBuyâ rating on the company.
To be sure, analysts did highlight some concerns. For example, William Blair analyst Dylan Carden advised that the wide operating income guidance range offered by management could signal some deceleration. 
âManagement guided third-quarter operating income between $0 and $3.5B, suggesting a margin of 1.4% at the midpoint, or nearly 300 basis points below the prior year,â he noted. âWhile the company continues to see benefit from better fulfillment and distribution cost control, reflected in a sequential cost improvement of some $1.5B, offset by higher infrastructure investments and larger depreciation for AWS. Higher energy costs and continued investment in content, such as Thursday Night Football and Lord of the Rings, will also add incremental expenses.â
His concerns on expenses were added to by Bank of Americaâs Justin Post who noted the guidance as among the âblemishesâ on a largely positive quarter. After a significant headcount reduction, he anticipated better guidance on operating income. Additionally, a jump in inventory to $38B, a 57% gain from the prior year, was noted as a concern. 
Still, neither analyst was shaken from their bullish ratings on the stock after the results, instead reflecting upon minor points of concern in an otherwise strong report. In fact, Post raised his price target slightly to $160 from a prior $158.
Amazon (AMZN) shares rose about 11% in premarket trading on Friday, implying an opening price of about $135.73.
Dive into the details of Wall Streetâs ratings on the stock.