Amazon.com Inc. (NASDAQ: AMZN) reported its first quarter financial results after the closing bell on Thursday and smashed estimates in both revenue and earnings. Shares surged by over 7 percent to a new all time high of Friday’s open of $1,634.01.
For the first quarter, Amazon reported revenue of $51.0 billion, increasing 43 percent year over year and topping Thomson Reuters’ estimates of $49.8 billion. The company reported net income of $1.6 billion or an EPS of $3.27, more than doubling the same quarter a year prior.
an EPS of $3.27, surpassing analysts’ estimates of $1.25.
The strong quarter was driven by Amazon’s advertising and web service segment, said Amazon’s Chief Financial Officer Brian Olsavsky. North American region reported sales of $30.7 billion, growing 46 percent year over year, while international sales were $14.9 billion.
Amazon Web Service reported revenue of $5.44 billion, growing 48 percent year over year and topping FactSet’s estimates of $5.25 billion. AWS reported $1.4 billion in operating income, accounting for 73.6 percent of the company’s operating income.
“AWS had the unusual advantage of a seven-year head start before facing like-minded competition, and the team has never slowed down,” said Jeff Bezos, Amazon founder and CEO. “As a result, the AWS services are by far the most evolved and most functionality-rich. AWS lets developers do more and be nimbler, and it continues to get even better every day. That’s why you’re seeing this remarkable acceleration in AWS growth, now for two quarters in a row.”
Amazon also increased its Prime price from $99 to $119 annually. Amazon increased its price because the value it offers to Prime users has substantially grown in the recent years. Subscription revenue for the quarter was $3.1 billion, increasing 60 percent year over year.
For the second quarter, Amazon forecasts net sales between $51 billion and $54 billion, increasing 34 percent to 42 percent year over year. Operating income is expected to be between $1.1 billion or $1.9 billion.
Amazon’s strong growth and quarter led Wall Street to reiterate their buy ratings and increase their price targets for the online retailer.
Goldman Sachs analyst Heath Terry reiterated his buy rating for Amazon, setting a price target to $2,000 from $1,825. Terry believes that Amazon is still in its early stages in many of its segments, such as its cloud service, and that the market is underestimating the company’s growth.
J.P. Morgan said that users should stay with Amazon regardless of its increased Prime price. Analyst Doug Anmuth increased his price to $1,900, maintaining a buy rating.
UBS analyst Eric Sheridan predicts that Amazon’s price hike will benefit the company’s subscription sales, saying that it is “like to be supportive of a ~20% rev growth CAGR (‘17-’22).” Sheridan raised his price target to $1,830 and reiterated his buy rating.
Stifel analyst Scott Devitt raised his price target to $2,020 and maintaining a buy rating, saying that he sees Amazon’s current momentum will keep driving its businesses.
Susquehanna analyst Shyam Patil reiterated his buying rating and raised his price target to $2,000, representing a 26.4 percent upside.
Amazon shares have increased by 34.7 percent this year.