Amazon.com (AMZN.O), which opens new tabs, saw its shares soar 6% ahead of Friday’s market open as the industry leader in e-commerce announced better-than-expected holiday quarter sales and made money from its rapidly expanding AI-powered cloud division.
Along with joining other major tech companies like Microsoft (MSFT.O), the corporation also announced plans to increase expenditure on the much-hyped technology in 2024. Overall, the company’s efforts in AI are beginning to pay off.
Despite impressive results, “we find it most encouraging that several of the most significant, incremental drivers have really only just begun (for Amazon),” according to Brad Erickson, an analyst at RBC Capital Markets.
The retail behemoth reported a 14% increase in revenues over the holiday quarter, indicating robust online spending in spite of a tight economy. As a result, at least eight brokerages increased their price targets on the company.
“We believe Amazon is executing extremely well and the challenges the company faced in Retail during the pandemic and in AWS through optimizations will make the company stronger on the other side,” the analysts at J.P.Morgan stated in a note. One of the most positive brokerages on the company, it increased its price objective by $35 to $225.
The company’s shares, which increased 81% in 2023, were trading at $168.39 prior to the bell, one day after Amazon also predicted that revenue for the current quarter will reach as high as $143.5 billion.
The stock was selling at 40.51 times its projected earnings per share as of the most recent close, versus 31.57 for cloud rival Microsoft (MSFT.O), opens new tab, and 23.75 for rival Walmart (WMT.N), opens new tab, in the retail space.
If premarket gains continue, Amazon’s market capitalization is expected to increase by over $100 billion.
Investor optimism persisted even though significant sums of money were spent this year on cloud infrastructure to facilitate the quick uptake of generative AI technologies.
Parnassus Investments shareholder Krishna Chintalapalli stated, “I would expect that the recent state of generative AI investments should eventually lead to strong return on investment.”
