Cloud services seen growth driver for Amazon

Fri Jul 24, 2015 3:12pm EDT
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By Eileen Soreng

(Reuters) - Inc's shares surged more than 20 percent in early trading on Friday, adding more than $46 billion to the company's market value, after strong growth in the e-commerce giant's cloud business drove a surprise quarterly profit.

The company's market capitalization soared to more than $270 billion, overtaking that of Wal-Mart Stores, the world's biggest retailer.

Revenue from Amazon's cloud operations - Amazon Web Services (AWS) - nearly doubled in the second quarter, indicating that the business was poised to drive sustainable earnings for the online retailer, Wall Street analysts said.

Operating margins at the unit jumped to 21.4 pct from 7.7 percent.

"Product sales are Amazon's bread, but AWS is its butter," Wedbush Securities analyst Michael Pachter said in a note, raising his price target on the stock by 21 percent to $700.

"They delivered a pretty large profit, we expected a loss ... they exercised discipline and did not invest in new consumer electronic product launches."

The company drew investor ire last year for spending too much after its Fire Phone and Fire TV failed to excite consumers.

Morgan Stanley raised its price target to $740 - the highest on the stock - implying a 53 percent increase from Thursday's close of $482.18. The stock touched a high of $580.57 on Friday.   Continued...

The, Inc. logo is seen on the side of a delivery truck in Brooklyn, New York October 23, 2014.  REUTERS/Brendan McDermid