Wells Fargo analyst Ken Gawrelski is singing the praises of Amazon.com Inc.’s stock (AMZN, -2.04%) as it continues to soar in 2023, with a remarkable 51% increase so far this year. In fact, Gawrelski considers it such a standout performer that he has included it in Wells Fargo’s esteemed “signature picks” list.
Maintaining an optimistic outlook, Gawrelski believes that there is still a favorable risk-reward balance for Amazon leading up to the company’s next earnings report. In a recent note to clients, he expressed his increasing confidence in the prospect of revenue reacceleration for Amazon’s AWS cloud-computing business within the third quarter.
Recognizing that Wall Street’s expectations for AWS growth in July are on the rise, Gawrelski remains positive, citing Amazon’s unwavering commitment to acceleration as a catalyst for continued success in the company’s shares.
Related: 4 Key Reasons Why Amazon’s Stock Can Soar Further – Insights from an Analyst
AWS Business Growth and Third Quarter Potential
The AWS business is the driving force behind Amazon’s profits. However, similar to other cloud-computing players, the company has experienced a slowdown in growth in this area recently. In particular, management’s commentary on August trends will be closely monitored by industry experts like Gawrelski. This is because the performance during this period can be compared to the year-ago period when customers began to optimize their usage of AWS and became more cost-conscious.
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Despite the challenges, Gawrelski still maintains his $159 price target for Amazon shares. However, he has become more optimistic about the company’s overall operating-income potential for the third quarter. As a result, he has increased his estimate from $5.6 billion to $5.9 billion. This increase in optimism is driven by Gawrelski’s bullish view of the revenue opportunities for AWS and the company’s ability to find efficiencies through changes in fulfillment centers.
Looking ahead, the prospect of achieving $5.9 billion in third-quarter operating income does not seem like an unrealistic goal. This is especially true considering that Prime Day falls within this period and the improving high-margin advertisements backdrop.
Read: 5 Hacks to Get the Best Deals on Amazon Prime Day — and Other Summer Sales
Shares of Amazon were up 1% in Tuesday’s premarket action. They closed Monday at $127.13.
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