Why Amazon stock popped on Thursday

Actions of Amazon (AMZN) it climbed higher on Thursday, adding as much as 3.8%. As of 3:05 PM ET, the stock was still up 2.8%.

There were a pair of catalysts that sent the cloud computing leader higher. The company got some love from Wall Street, and Amazon Web Services (AWS) got a new prestigious customer.

Strong and growing momentum

Cantor Fitzgerald analyst Deepak Mathivanan initiated Amazon shares with an overweight (buy) rating while assigning a price target of $230. For those keeping score at home, that represents a potential upside of 33% from Wednesday’s closing price. The analyst cited opportunities in both online retail and AWS. Mathivanan believes Amazon has room to expand its retail margins, which will boost profits. He also suggests that AWS’s growth will continue to accelerate.

The analyst notes that “Amazon’s dominant competitive position in two large consumer and software markets, with its retail and cloud businesses, provides plenty of reason to be optimistic over the next 12-18 months.”

The second catalyst was the announcement that the Central Japan Railway Company had selected AWS to advance its operations. The high-speed railway provides services for 170 million passengers every year. The company will use AWS’ Internet of Things, machine learning and generative artificial intelligence (AI) capabilities to help make data-driven decisions, improve operational efficiency and reduce maintenance costs.

Multiple opportunities

By acquiring a major new customer, Amazon seemed to make the analyst’s point about AWS acceleration, and it clearly did its research. In the second quarter, AWS grew sales by 19%, marking the fourth consecutive quarter of accelerating year-over-year growth.

Additionally, Amazon is second to none in digital retail, generating nearly $122 billion in sales in Q2. Even a small improvement in the company’s margins will result in a large increase in profits.

Finally, at roughly 3x sales, Amazon is attractively priced, especially in light of multiple growth opportunities.