'Gearing up for a big 4Q with fulfillment and COVID investment': Here's what 4 Wall Street analysts had to say about Amazon's 3rd-quarter earnings report

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  • Amazon posted a strong third-quarter earnings beat on Thursday, but its stock suffered in Friday trades on a tepid fourth-quarter outlook.
  • Amazon CEO Jeff Bezos said customers are shopping early for their holiday gifts, “which is just one of the signs that this is going to be an unprecedented holiday season.”
  • Here’s what four Wall Street analysts had to say about Amazon’s 3rd-quarter earnings report.
  • Visit Business Insider’s homepage for more stories.

Amazon third-quarter earnings report easily beat analyst estimates, but a tepid fourth-quarter forecast hurt the stock in Friday trades.

While Amazon’s fourth-quarter revenue outlook bested analyst estimates, operating income forecasts fell flat, below analyst consensus by more than $US1 billion.

Still, Amazon CEO Jeff Bezos is bullish on the 4th-quarter and holiday shopping season, saying that customers are shopping early for their holiday gifts, “which is just one of the signs that this is going to be an unprecedented holiday season.”

Here’s what four Wall Street analysts had to say about Amazon’s 3rd-quarter earnings report.

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1. Goldman Sachs

Rating: Buy Price Target: $US4,200

“We continue to believe that the long term steepening of Amazon’s growth curve 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 are likely to drive share price outperformance well beyond the current crisis,” Goldman Sachs said.

2. JPMorgan

Rating: Overweight Price Target: $US4,100

JPMorgan was impressed with Amazon’s earnings report, and rewarded the company with a $US50 increase to its price target to $US4,100. JPMorgan rates Amazon as a “top idea.”

“Overall, AMZN exceeded high expectations on the top-line, & while we recognise the cost is high, AMZN is making significant investments to keep up with elevated demand and deliver for customers in a way that few, if any, others can through this time period.We believe the benefits to AMZN will pay off in terms of driving increased customer loyalty(as evidenced the last 2 qtrs w/higher Prime retention), accelerated e-commerce adoption, & sustainable penetration lifts in emerging categories such as grocery,” JPMorgan said.

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3. Bank of America

Rating: Buy Price Target: $US3,650

Bank of America applauded Amazon’s earnings report with a $US50 increase to its price target to $US3,650 from $US3,600.

“Amazon continues to invest in its delivery infrastructure, with $US12bn in capital spending in Q3 alone (and $US30bn+ YTD), building a formidable long-term logistics asset,” BofA said.

“3Q results continue to demonstrate the strong profitability potential in the model when revenues match investments with assets running at capacity. With COVID cases increasing, we like Amazon’s 4Q setup with strong holiday volumes potentially driving margins well above guidance. Amazon remains best positioned for the Online retail and Cloud shifts,” BofA concluded.

4. Stifel

Rating: Buy Price Target: $US3,500

“Amazon is well positioned from a capacity standpoint heading into the holiday season, following a successful test over Prime Day and the elevated investment in fulfillment. Amazon remains one of the best positioned companies for the acceleration to digital in retail and the transition to cloud services,” Stifel said.

“The ability to handle retail demand through the holiday season is a key question/concern and was a leading topic of discussion on the call. Capacity will likely be tight across the industry, but the company feels good about its capacity position given the investment in fulfillment (50% increase in network footage this year) and people, many focused on the transportation leg. QTD over 100,000 more employees has been added,” Stifel said.

“We believe Amazon is well positioned to continue to benefit from the current secular shifts in eCommerce and cloud computing and is well-prepared for the holiday season as plans to invest in capacity were in motion prior to the pandemic,” Stifel concluded.

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