Amazon Leads Dow Jones Stocks After Stellar Earnings Report

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Amazon (AMZN) stock is the best Dow Jones stock Friday after the world's largest e-commerce company beat top- and bottom-line expectations for its third quarter.

In the three months ended September 30, Amazon's revenue increased 11% year over year to $158.9 billion, boosted by 19.1% growth in its Amazon Web Services (AWS) cloud segment to $27.5 billion and an 18.8% rise in Advertising sales to $14.3 billion. Its earnings per share (EPS) were up 52.1% from the year-ago period to $1.43.

"As we get into the holiday season, we're excited about what we have in store for customers," said Amazon CEO Andy Jassy in a statement. "We kicked off the holiday season with our biggest-ever Prime Big Deal Days and the launch of an all-new Kindle lineup that is significantly outperforming our expectations."

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The executive added that there's a lot in the hopper for Amazon, too, including its NFL Black Friday game and Election Day coverage with Brian Williams on Prime Video. Jassy also said the company has 100 new cloud infrastructure and artificial intelligence (AI) capabilities that will be revealed at Amazon's AWS re:Invent the week after Thanksgiving.

The headline results beat analysts' expectations. Wall Street was anticipating total revenue of $157.2 billion and earnings of $1.14 per share, according to CNBC. Meanwhile, advertising matched expectations of $14.3 billion and AWS revenue came up just shy of the $27.5 billion estimate.

For the fourth quarter, Amazon said it expects to achieve revenue in the range of $181.5 billion to $188.5 billion, representing growth of 7% to 11% from the year-ago period. The midpoint of this range, $185 billion, is slightly below analysts forecast for Q4 revenue of $186.2 billion.

Is Amazon stock a buy, sell or hold?

Wall Street is bullish on the Magnificent 7 stock and for good reason. Amazon is up 31% for the year to date, easily outperforming the S&P 500's 21% gain.

According to S&P Global Market Intelligence, the average analyst target price for the consumer discretionary stock is $227.86, representing implied upside of more than 14% to current levels. Additionally, the consensus recommendation is a Strong Buy.

Financial services firm Stifel is one of the more bullish outfits on AMZN stock with a Buy rating and $245 price target.

"Amazon is one of the primary beneficiaries of Covid given accelerated e-commerce sales growth and Prime membership adoption, as well as the digital transformation that will accelerate cloud services adoption, which we expect to see over a longer time frame," says Stifel analyst Mark Kelley.

And as a leader in these two rapidly growing industries, "we believe Amazon remains well positioned in a recovery scenario given cloud services, marketing services and certain e-commerce categories and geographies are still in the early phases of development."

Joey Solitro is a freelance financial journalist at Kiplinger with more than a decade of experience. A longtime equity analyst, Joey has covered a range of industries for media outlets including The Motley Fool, Seeking Alpha, Market Realist, and TipRanks. Joey holds a bachelor's degree in business administration.