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After earnings, analysts revamp Amazon stock-price targets

Amazon has come a long way from its origins as a book/music/video seller to becoming a retail and technology giant. Founded by Jeff Bezos, the company has established a dominant position in both e-commerce and cloud services.

Morningstar analyst Dan Romanoff emphasizes Amazon’s leadership in e-commerce, driven by its substantial size and scale. The company’s ability to offer consumers a vast selection of competitively priced goods is a key factor in its success. The Prime membership further solidifies customer loyalty, generating high-margin recurring revenue.

In the realm of cloud services, Amazon Web Services (AWS) positions the company as a major player in public cloud services. The growth of AWS, combined with the expansion of Amazon’s advertising business, particularly in streaming outlets, adds to its overall success.

The recently released fourth-quarter earnings report surpassed Wall Street expectations, with a 14% surge in revenue to $170 billion and a net income of $10.6 billion. Strong holiday sales contributed significantly to these impressive figures. AWS revenue, growing at 13%, exceeded the gains of the previous two quarters, and AWS operating profit saw a substantial increase of 38%.

The advertising segment experienced a notable 27% revenue increase, showcasing Amazon’s advertising growth outpacing its industry peers. Improvements in fulfillment and cost efficiency have contributed to stronger-than-anticipated profitability in the retail sector.

Amazon’s positive outlook extends to cost management, with operating expenses growing at a slower rate (7%) compared to revenue. Looking ahead, the company forecasts an 8% to 13% increase in revenue for the next quarter, with a projected 67% to 150% growth in operating income.

Following the strong earnings report, several analysts raised their target prices for Amazon, reflecting optimism about the company’s future performance. Romanoff notes a positive shift in operating margin outlook, indicating sustained profitability over the coming years.

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