Amazon Impresses As Cloud Stabilizes, Alexa Users Grow

Amazon.com, Inc. (NASDAQ: AMZN)'s third-quarter earnings report showed that the "flywheel is spinning faster," but analysts at KeyBanc aren't buyers of the stock. The firm's Edward Yruma maintains a Sector Weight rating on Amazon's stock with no assigned price target due to valuation reasons.

Amazon reported a total revenue of $43.7 billion, which came in ahead of consensus estimates and signals the e-commerce giant continues to "disproportionately capture" market share in the online space, the analyst wrote in a research report. But perhaps more impressive the cloud segment, AWS, saw its revenue stabilize at 42 percent year-over-year growth, which marks an end to eight quarters of declines.

In fact, the AWS segment showed an acceleration of usage-based revenue for the second consecutive quarter while the segment's operating margin moved higher after three quarters of declines. Overall, AWS's operating profits came in ahead of the $1 billion mark for the first time ever.

Meanwhile, Alexa's installed base has grown more than five-fold from a year ago, which implies Amazon is growing its lead in the conversational commerce space.

Of particular note, the North American retail EBIT segment fell from $255 million to $112 million a year ago even though it includes a $21 million EBIT contribution from Whole Foods, Yruma also wrote. This does mark the third consecutive quarter of year-over-year declines.

Bottom line, Amazon's earnings report made it clear that its prospects for continued revenue growth remain in place, but this is "appropriately reflected in the stock," the analyst concluded.

In Friday's pre-market session, shares of Amazon were up 8.08 percent at $1,051.00.

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