What happened
Shares of Amazon (AMZN +0.26%) were up 2% as of 12:25 p.m. ET on Thursday after several analysts weighed in with their opinions on the stock's near-term return potential.
BMO Capital reiterated an outperform rating for the stock, but the analyst also cut the near-term price target from $4,100 per share to $3,600. Other firms also adjusted their price targets but kept a bullish view on Amazon. The most bullish call was UBS, which set a buy rating on the stock with a $4,700 price target.
Image source: Amazon.
So what
These analyst calls are not as outlandish as they might seem. Amazon's trailing-12-month revenue through the third quarter was 72% higher than the same period in 2019. During the earnings call, CFO Brian Olsavsky said, "We've nearly doubled our operations capacity in the past two years to keep up with customer demand."
Now what
Management expects this higher plateau of demand to keep growing in 2022, as it is continuing to ramp up capital spending. Through the first nine months of 2021, Amazon spent $39 billion on capital expenditures, an increase of 77% over the previous year. This includes spending on technology infrastructure to support the online retail business and Amazon Web Services.
Amazon will report its fourth-quarter earnings on Feb. 3 after the market close. The company has incurred billions in cost to deal with COVID-related issues, including inflation and global supply chain disruptions. Management anticipated these costs approaching $4 billion in the fourth quarter, which will take a bite out of the bottom line.
But long-term investors should be more focused on the performance of the long-term growth drivers, such as Prime engagement, advertising, and AWS.
