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Amazon Down, but Not Out, as Wall Street Backs Stock to Shine

imageStock Markets8 hours ago (May 01, 2020 02:19PM ET)

(C) Reuters.

By Yasin Ebrahim

Investing – Amazon is nursing heavy losses on Friday after warning it would spend its entire second-quarter profit on Covid-19 related expenses, but that has done little to drown out the optimism from several Wall Street analysts who upgraded their outlook on the e-commerce giant.

“While we expect heightened investments related to Covid-19 to compress margins for the remainder of 2020, the pandemic will likely accelerate several trends benefiting Amazon over the long term, including eCommerce, cloud computing, and digital advertising,” Canaccord said in a note as it upgraded its price target on the stock to $2,750 from $2,600. (NASDAQ:AMZN) was down 7%.

The company said it would spend its entire second-quarter profit – expected to be in about $4 billion – on Covid-19 related expenses and forecast operating income will range from a loss of $1.5 billion to a profit of $1.5 billion.

But there were plenty of positives to take from the quarterly report, according to Canaccord.

Amazon Web Services has been the company’s golden goose for many a quarter and grew revenue 33% in the quarter year on year, just below consensus, but margin expanded to its highest level since the third quarter of 2018.

The e-commerce giant’s venture into advertising to rival Facebook (NASDAQ:FB) and Google (NASDAQ:GOOGL) has also garnered attention, with other revenue, which primarily consists of advertising revenue, growing 44% year on year during the first quarter, a trend which is likely to continue.

“While management observed a modest pullback of ad spend in March due to Covid-19, the company continues to take share of digital ad spend globally,” Canaccord added.

Others on Wall Street echoed the bull case on Amazon, with UBS and Susquenna raising their price targets on Amazon to $3,000 from $2,440 and $2,500 respectively.

Amazon Down, but Not Out, as Wall Street Backs Stock to Shine

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