Morgan Stanley raises its Amazon price target to the highest on Wall Street

Morgan Stanley is getting more bullish on shares even after its stunning gains so far this year.

The firm reiterated its overweight rating and increased its price target for Amazon shares to $2,500 from $1,850, representing 29 percent upside to Tuesday‘s close. It is the highest target out of the 41 analysts who cover Amazon, according to FactSet.

At a $2,500 stock price, Amazon would have a market valuation of about $1.2 trillion.

“We have increasing confidence that Amazon‘s rapidly growing, increasingly large, high margin revenue streams (advertising, AWS, subscriptions) will drive higher profitability and continued upward estimate revisions,” analyst Brian Nowak said in a note to clients Wednesday. AWS is Amazon Web Services, the retailer‘s cloud computing division.

Nowak noted Amazon outperformed the top end of its operating profit guidance by an average of 60 percent over the past three quarterly reports. He predicts the company‘s high profit margin businesses such as cloud computing, subscriptions and advertising will generate nearly $45 billion in profit by 2020 from an estimated $25 billion this year.

Amazon shares are up 1.1 percent in Wednesday‘s premarket session. Its stock is up 65 percent so far this year through Tuesday vs. the S&P 500‘s 8 percent gain.

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