Amazon remains a top pick on the Street despite 8% post-earnings plunge

Analysts broadly defended bullish theses on Amazon AMZN despite a deep post-earnings plunge for the tech giant.

Shares of the Seattle-based tech giant fell sharply on Friday after a mixed earnings result on Thursday evening. Along with a messy EPS figure, slower than expected growth in the cash-cow AWS business appeared to be a major hang-up for the market.

“While AMZN’s retail business is on the structural upswing, AWS continues to face incremental macro headwinds as businesses attempt to optimize their cloud spend,” Morgan Stanley analyst Brian Nowak noted. “AWS softness is being seen across industries as mortgage companies (i.e. housing), crypto, and advertising businesses were particularly weak.”

That said, he does not think that the softness is likely to persist for the long term.

“In our view, these near-term growth headwinds are more transitory and macro driven,” he concluded. “We acknowledge that cleanly modeling growth during these volatile periods is challenging, but we don’t see a change in the multi-year opportunity.”

As such, he maintained an Outperform rating and top pick status for the stock. Additionally, he raised EBIT estimates based upon what he sees as robust retail performance, taking his price target to $150 from $140.

A focus on efficiency also led analysts at Cowen, Benchmark, UBS, and Bank of America to raise profit estimates for the upcoming quarters, with guidance assumed to be conservative. Likewise, Bank of America indicated that the trajectory for cloud growth is “bent not broken.”

Finally, Wells Fargo reiterated Amazon as one of its “Signature Picks.” 

“We remain confident on AMZN’s ability to drive penetration of additional retail product categories and key emerging geographies, maintain its lead in cloud computing and execute against additional opportunities such as online advertising (across both endemic and non-endemic advertiser categories), which we believe offer the company compelling growth and profit characteristics,” equity analyst Brian Fitzgerald wrote. 

He maintained an Outperform rating. However, he broke with his contemporaries in cutting his price target to $145 from $155.

Despite the optimistic outlook from Wall Street analysts, shares of Amazon slumped 8.43% at the market close on Friday.

Read more on a reported FTC probe into the company being prepared.