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Amazon beats on profit, disappoints on revenue

Second-quarter sales rose 39 percent to $52.9 billion

Canaccord Genuity reaffirmed a "buy" rating and set a $2,000.00 price target (up from $1,800.00) on shares of Amazon.com in a report on Thursday, July 12th.

Amazon has smashed Wall Street expectations after it reported a strong profit and pleasing revenue growth, thanks in part to the performance of AWS cloud unit and advertising.

A July event that the company created to drum up business during the summer shopping lulls, Prime Day, has become a bonafide event to rival Black Friday.

The results show that Amazon is finally becoming profitable - a relief to investors after the company maintained razor-thin profits in order to build out its capacity. Amazon expects revenue in the range of $54 billion to $57.5 billion in the third-quarter, slightly below street estimates of between $55.6 billion to $62.2 billion. It has started to fire on all cylinders, which means that its many divisions and products lines are doing well.

According to the research firm eMarketer, Amazon's e-commerce revenue will grow more than 28% this year to reach $394 billion, and will account for 49% of USA online retail sales and almost 5% of all retail spending.

However, weaker than expected sales growth tempered the results. Later, Olsavsky revealed Amazon is increasing its reach of Alexa with 13,000 smart-home devices from 2,500 unique brands, and it is expanding into hotels "to allow you to experience Alexa while you're traveling".

Amazon continues to expand grocery delivery from Whole Foods Market to more than 20 cities in the US, offering customers fast delivery on natural and organic products through Prime Now. "There are now tens of thousands of developers across more than 150 countries building new devices using the Alexa Voice Service, and the number of Alexa-enabled devices has more than tripled in the past year".

Amazon Web Services (AWS), the company's profit center, posted a 49 percent rise in sales to $6.1 billion, also beating the average estimate of $6 billion.

Revenue from the firm's "other" category, which includes advertising, more than doubled to about $2.2bn.

"A big contributor to the quarter and the last few quarters obviously has been strong growth in our highest profitability businesses and also advertising", Brian Olsavsky, CFO of Amazon said on a media call.

Amazon's net income saw a whopping 12-fold increase from the year-ago period, to a record $2.5 billion, marking the third consecutive quarter of surpassing $1 billion in profits.

Revenue soared 39 percent to $52.89 billion in the second quarter, but was below the $53.37 billion analysts expected. Subscription services (including Prime), sales in physical stores and third-party seller fees made up the rest.

The firm said it would raise the price of Prime memberships in the United States by $20, but that doesn't seem to have deterred consumers.

Reinforcing the fact that Alexa is a focus for the company, Amazon CEO Jeff Bezos was quoted in the company's earnings release about its importance. New Jersey Better Educational Savings Trust accumulated 2,100 shares or 3.38% of the stock.

The tech giant said shoppers bought over 100 million items during Prime Day.