'COVID-19 has been like injecting Amazon with a growth hormone': Here's what 4 analysts had to say about Amazon's earnings report as $4,000 price targets start to roll in

A worker in a face mask walks by trucks parked at an Amazon facility as the global coronavirus outbreak continued in Bethpage on Long Island in New York.REUTERS/Andrew Kelly
  • Amazon reported second quarter earnings on Thursday that crushed analyst estimates.
  • Shares of Amazon popped as much as 6.4% on Friday as a number of updated Wall Street price targets began to breach the $4,000 level for the e-commerce giant.
  • Amazon saw a surge in retail business as more consumers migrated to online shopping amid the COVID-19 pandemic.
  • Here's what three Wall Street analysts had to say about Amazon's blockbuster earnings report.
  • Visit Business Insider's homepage for more stories.

On Thursday, Amazon announced second quarter earnings that blew past Wall Street estimates as the company saw a surge in business due to the COVID-19 pandemic.

Shares of Amazon popped as much as 6.4% to $3,246.82 in Friday trades.

Here are the key numbers:Advertisement

GAAP earnings per share: $10.30, versus analyst estimates of $1.50
Revenue: $88.91 billion, versus analyst estimates of $81.29 billion
AWS revenue: $10.81 billion, versus analyst estimates of $11.02 billion

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Here's what 3 analysts had to say about Amazon's blockbuster earnings report:
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1. D.A. Davidson: "COVID-19 has been like injecting Amazon with a growth hormone"

Price target: $3,800
Rating: Buy

In a note published on Friday, D.A. Davidson increased its price target to $3,800 from $2,625, representing potential upside of 17% from current levels. Davidson highlighted that COVID-19 has driven sales expansion in ways that not even one-day shipping for Prime members could do.

The Wall Street firm highlighted that Amazon's AWS cloud growth decelerated to 29% from 32.8% in the quarter, which is in line with what Microsoft reported for its Azure cloud unit in the second quarter. Davidson highlighted two catalysts that it expects could drive Amazon shares higher over the next 12 months: stronger-than-expected results from Amazon's AWS, as well as Amazon's "increasing mix of highly-profitable third-party sales," according to the note.Advertisement

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2. JPMorgan: "Amazon's Prime ecosystem stood out this quarter"

Price target: $4,050
Rating: OverweightAdvertisement

JPMorgan pointed to Amazon's resilient strength in Prime amid the pandemic as one reason to boost its price target 35% to $4,050 from $3,000. "Prime member growth accelerated in the US & Int'l, existing member renewal rates increased, & Prime Video viewing hours doubled year-over-year," JPMorgan highlighted.

The bank also highlighted Amazon's strength in the grocery category, which has seen its delivery capacity increase 160% and saw overall grocery sales triple in the quarter, as consumers shifted to e-commerce and limited their trips to physical stores amid the COVID-19 pandemic.

Finally, JPMorgan added that Amazon's shift of Prime Day from July to the fourth quarter should help smooth out demand for Amazon's seasonally strong holiday quarter, help avoid warehouse capacity issues, and help revenue "re-accelerate" in the quarter.Advertisement

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3. Bank of America: "AWS business not immune to economy; but strong backlog"

Price target: $3,560
Rating: BuyAdvertisement

Bank of America increased its price target from to $3,560 from $3,280 on impressive strength in Amazon's Cloud unit coupled with strength in e-commerce. The bank raised its revenue and earnings-per-share projections as "strong third-party sales growth and logistics leverage is improving retail profitability," according to the note.

BofA said while AWS growth decelerated to 29% from around 33%, its backlog growth accelerated to 65% year-over-year, and highlighted Amazon's statement that long-term relationships with its cloud customers remain strong, "with many customers regretting not making more progress in cloud" pre-COVID-19, the note said. Additionally, while AWS growth decelerated, it was much more muted relative to Microsoft's Azure unit, which saw a 10% decline in growth. "With backlog accelerating we expect less revenue deceleration from here" for Amazon, BofA added.Advertisement

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4. Goldman Sachs: "We believe that the long term steepening of Amazon's growth curve ... [is] likely to drive share price outperformance well beyond the current crisis"

Price target: $4,200
Rating: BuyAdvertisement

Goldman Sachs retained the title of having a Wall Street high price target on Amazon. The firm increased its price target to $4,200 from $3,800, representing potential upside of 30% from current levels.

Goldman said that Amazon is poised to experience share price outperformance well beyond the COVID-19 crisis driven by the "acceleration of consumer adoption of ecommerce and enterprise adoption in cloud computing, enabled by the company's investments in fulfillment and infrastructure, and the associated high returns," according to the note.

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