Wedbush Securities on Monday hiked its price target on Amazon (AMZN) - Get Amazon.com, Inc. Report to $1,250 from $900, making it the highest price target among 46 Wall Street analysts surveyed by FactSet. It also represents a 40% upside from the stock's closing price on Friday.
Shares of Amazon were advancing 1.0% to $907.50 on Monday morning and are up almost 20% so far this year.
The firm, which maintained its Outperform rating on Amazon, said it expects the e-commerce giant to deliver "substantial" earnings growth when it reports fiscal first-quarter results after Thursday's closing bell. Wall Street is looking for Amazon to report adjusted earnings of $1.08 per share on revenue of $35.4 billion.
Operating margins are likely to be somewhat tempered by spending on new initiatives such as video content, fulfillment and international expansion, said Wedbush analyst Michael Pachter. Analysts estimate Amazon will spend as much as $4.5 billion on video content in 2017. That's up from the $3.3 billion it spent in 2013.
Amazon Web Services is expected to be the big growth driver in the company's upcoming earnings, Pachter noted.
"Amazon appears intent on growing annual profits (with some quarterly volatility), which we expect to continue as the company invests in growth," Pachter wrote in a note to clients. "Amazon Web Services should be the growth engine, with its gross and operating margins expanding rapidly."
Separately, Nomura analyst Anthony DiClemente raised Amazon's price target to $975 from $925 on Monday, citing increased cloud demand and international growth, especially in India. Despite reiterating its Buy rating, the firm also lowered its fiscal 2017 earnings per share outlook to $7.09 from $7.66 based on belief that Amazon's "aggressive" investment plans could pose some risks in the near term.
Goldman Sachs analyst Heath Terry argued on Monday that those investments should actually drive greater-than-expected revenue growth over time, rather than hurt its top line. Terry increased his price target on Amazon to $1,100 from $1,000 and maintained a Conviction Buy rating on the stock.
"Put simply, in a business that generates the high returns that Amazon has demonstrated, reinvesting in the business should ultimately pay off," he wrote.