Last week Amazon (AMZN) was able to join Alphabet (GOOGL) in impressively surpassing third-quarter top and bottom-line expectations.
Accompanied by very positive commentary surrounding artificial intelligence (AI) being the future propeller of its AWS cloud services, Amazon’s stock has risen +10% since reporting while Alphabet’s stock is down more than -10% on concerns that its cloud segment is not receiving quite the boost from AI as Wall Street expected.
With Amazon’s stock now up +56% year to date, let’s see if it’s time to buy AMZN shares for more upside following the company’s strong Q3 results.
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Amazon Q3 Review
Reporting its Q3 results last Thursday, Amazon’s earnings of $0.85 per share easily surpassed the Zacks Consensus of $0.58 a share by 46% with sales of $143.08 billion topping estimates by 1%.
More impressive, Q3 earnings skyrocketed 325% from $0.20 a share in the prior year quarter as the e-commerce giant continues to prioritize profitability and lower its spending with sales up 12% from a year ago.
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Despite monitoring expansion costs, one of the highlights of the quarter was Amazon’s Advertising Services segment which brought in $12.06 billion topping estimates by 5% and soaring 26% year over year.
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Furthermore, Amazon’s AWS segment sales increased 12% YoY to $23.05 billion although this slightly missed estimates of $23.18 billion.
Still, investors were delighted at CEO Andy Jassy’s commentary that AWS is innovating and delivering at a rapid clip, particularly in generative AI.
Jassy stated Amazon Bedrock (custom AI chips) is the easiest and most flexible way to build and deploy generative AI applications with its coding companion the CodeWhisperer allowing enterprises to have the equivalent of an experienced engineer.
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Outlook & Price Target
According to Zacks estimates, Amazon’s fiscal 2023 EPS is expected at $2.34 per share compared to $0.71 a share last year. Even better, FY24 earnings are projected to climb another 40% to $3.13 per share. On the top line, sales are forecasted to be up 11% this year and jump another 12% in FY24 to $639.89 billion.
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Correlating with Amazon’s attractive outlook the Average Zacks Price Target of $169.15 a share represents 32% upside in AMZN from current levels.
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Bottom Line
Amazon’s stock currently lands a Zacks Rank #3 (Hold) following its strong Q3 results. On top of the sharp post-earnings rally in AMZN shares, better buying opportunies may still be ahead considering recent volatility in the broader market but holding Amazon’s stock could be rewarding.
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Amazon.com, Inc. (AMZN) : Free Stock Analysis Report
Alphabet Inc. (GOOGL) : Free Stock Analysis Report