Amazon Stock: Why One Analyst Says to Buy the Earnings Dip

Amazon.com (AMZN) stock is plummeting Friday after the world’s largest e-commerce company reported mixed earnings results for its second quarter and issued a third-quarter outlook that came up short of analysts’ estimates.

In the three months ended June 30, Amazon’s revenue increased 10% year-over-year to $148 billion, driven by a 19% year-over-year rise in its Amazon Web Services (AWS) cloud segment to $26.3 billion. The company said earnings per share (EPS) nearly doubled from the year-ago period to $1.26.

“We’re continuing to make progress on a number of dimensions, but perhaps none more so than the continued reacceleration in AWS growth,” Amazon CEO Andy Jassy said in a statement.

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While Amazon’s results for AWS revenue and earnings per share came in above the $26 billion and $1.03 analysts were expecting, respectively, total revenue fell short of the $148.6 billion Wall Street forecast, according to CNBC.

For the third quarter, Amazon said it anticipates revenue in the range of $154 billion to $158.5 billion, representing growth of 8% to 11% from the same period a year ago. However, the midpoint of this range, $156.25 billion, is lower than analysts’ estimates for $158.24 billion in sales.

Is Amazon stock a buy, sell or hold?

Wall Street is bullish on the Dow Jones stock, and for good reason. Heading into today’s session, Amazon was up 21% for the year to date, building on its impressive 20-year return.

According to S&P Global Market Intelligence, the average analyst target price for AMZN stock is $221.92, representing implied upside of nearly 40% to current levels. Additionally, the consensus recommendation is Strong Buy.

Financial services by Wedbush is one of the more bullish outfits on AMZN stock with an Outperform rating (equivalent to a Buy) and $225 price target.

“Despite a mixed backdrop near-term, we would be buyers of the pullback in Amazon shares following Q2 results,” said Wedbush analyst Scott Devitt in a note Friday morning. “Our long-term thesis is unchanged, Amazon is positioned to deliver sustainable operating margin growth over a multi-year period that exceeds mega-cap peers including Meta (Outperform-rated) and Alphabet (Outperform-rated).”

Devitt adds that “Amazon remains our Best Idea.”