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Author: Alan LittleDate: 2020-08-03

Amazon (NASDAQ:AMZN) shares up, but is Q2 revenue rise sustainable?

Amazon shares closed 3.7% higher on Friday after the tech and e-commerce giant smashed earnings and revenue estimates for Q2.

After the close of play on Thursday, Amazon posted a staggering $10.30 earnings per share for the latest period, which was almost seven times higher than the pre-report estimates of $1.50 per share.

Revenue also impressed, growing 40.2% year-over-year to $88.91bn and beating the consensus by $7.6bn.

Like PayPal last week, Amazon has posted blowout financial results after benefitting from a rise in custom during the global pandemic.

The very strong showing prompted analysts to hike price targets and ratings for the company on Friday.

Goldman Sachs analyst, Heath Terry, was particularly bullish with a new $4,200 price target and Buy rating.

He noted that rapid consumer adoption of Amazon’s e-commerce and cloud computing has delivered higher returns that will be sustainable and “drive share price outperformance” for a while yet.

JP Morgan also added $1,050 to a new, higher $4,050 price target and stood pat on an Overweight rating.

However, the bullish notes and stellar Q2 report did not translate into a record day for Amazon stock on Friday.

There was a spike after the first bell before a realignment later in the day that meant shares finished at $3,164.68 (+3.7%).

Amazon was not the only tech leader to rise after Apple, Facebook and Alphabet also made gains after strong quarterly showings.

Vital Knowledge analyst, Adam Crisafulli, said investors are now taking a closer look at the returns ahead of the new week.

He said: “Investors are now trying to smooth out some of the numbers (i.e. how much of the monster upside was a function of extremely conservative guidance along w/an unsustainable spike in revenue and decline in expenses?)”.

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