Why Morgan Stanley Is Getting Bullish on Amazon

Morgan Stanley raises target price for Amazon

Amazon (AMZN) could join the trillion-dollar club since Morgan Stanley (MS) has increased its price target for Amazon to $2,500 from $1,850 while maintaining its “overweight” rating. Morgan Stanley’s $2,500 target price is the highest of any of the 41 analysts covering Amazon. At $2,500 per share, the company would be valued at $1.2 trillion.

Amazon stock rose 3.38% on August 29 and closed at $1,998.10 after touching a new 52-week high and an all-time high of $1,998.69 on August 29.

Why Morgan Stanley Is Getting Bullish on Amazon

Analysts positive on Amazon

Morgan Stanley’s analyst Brian Nowak remains confident about Amazon’s fundamentals and business model. Amazon has been rapidly growing its revenues backed by high margin revenue streams, including advertising, Amazon Web Services (or AWS), and subscriptions, which boast higher profitability.

The e-commerce giant posted revenue growth of 39.3% YoY (year-over-year) to $52.89 billion in the second quarter. Growth decelerated in the second quarter after five consecutive quarters of accelerating growth.

Amazon relies on its Echo devices, cloud business, advertising revenues, and Whole Foods Market stores for revenue growth. AWS generated $6.1 billion in revenue, growing 49% YoY in the second quarter. Revenue from AWS has been accelerating over the last three quarters, despite increased competition lately from Microsoft’s (MSFT) Azure and Alphabet’s (GOOGL) Google. Microsoft Azure’s revenue growth decelerated to 89% YoY in the second quarter.

Nowak remains positive on AWS’s expanding operating margins, which have significantly contributed to Amazon’s net income. In the second quarter, AWS had an operating margin of 26.9%.