Amazon shares surge 8% as e-commerce and cloud-computing thrive

Amazon.com closed up more than 8% on Friday on signs that its growth engines, e-commerce and cloud-computing, were faring well in an uncertain economy, helping shield the broader market from Apple's 4.8% slide after gloomy iPhone sales.

The reports capped what has been a positive earnings season for most big U.S. tech firms from Google-owner Alphabet to Meta, thanks to a pick-up in the digital ad market and improving demand for cloud services after a nearly year-long slump.

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Online retail giant Amazon's shares closed at a near one-year high and added more than $109 billion to its market value.

Apple, the world's most valuable firm, fell to a more than one-month low and lost around $144 billion in value as of Friday's close.

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The better-than-expected performance of Amazon's cloud business in the second quarter also lifted other members of the coveted trillion-dollar club, with Microsoft and Alphabet both rising more than 2%.

Wall Street analysts said Amazon's estimate-beating quarterly profit and sales showed that both its key businesses can grow together after two years of "unpleasant surprises".

"The second quarter is a game-changing quarter for Amazon; we would call it an-all clear moment," said SVB MoffettNathanson analyst Michael Morton.

"Retail and AWS (Amazon Web Services) are working together. No more handwringing on retail losses or AWS optimization, but rather 'how high can retail margins go' and 'when can we see the benefit of artificial intelligence at AWS?'"

At least 26 analysts — nearly half those covering the stock — raised their price targets on Amazon, pushing the median view to $170, according to Refinitiv data. That's an upside of nearly 32% to Amazon shares that have already risen almost 50% this year.

The surge in Amazon's stock reflected analysts' increased estimates for its earnings. At $139.57, the stock was valued at 47 times 2024 consensus earnings per share, down from 50 on Thursday, according to updated estimates tracked by Refinitiv.

At Friday's closing price of $181.99, Apple was valued at about 27.6 times fiscal 2024 consensus earnings per share.

The iPhone maker warned on Thursday that it was headed for a fourth straight quarter of declining sales as demand continues to slow for its flagship device, especially in developed markets.

But its services business was a bright spot and helped Apple top profit expectations for the June quarter.

"The services arm provides a welcome cushion to the group, but Apple still needs to revive hardware sales growth otherwise the market is going to worry about the next generation of customers to join its ecosphere," said Dan Coatsworth, stock market analyst at AJ Bell.

“It is time for Apple to launch something new and innovative, not just another variation of its core products.”