Amazon.com shares surged 9% on Friday on signs that both its growth engines, e-commerce and cloud computing, were faring well in an uncertain economy, helping shield the broader market from Apple’s 1.5% slide after gloomy iPhone sales.

The reports capped what has been a positive earnings season for most big US 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.

Online retail giant Amazon was set to add about US$120-billion to its market value, based on premarket movements. Meanwhile Apple, the world’s most valuable firm, was on course to slide below $3-trillion, with a $50-billion drop in its valuation.

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 1%.

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 optimisation, but rather ‘how high can retail margins go’ and ‘when can we see the benefit of artificial intelligence at AWS?'”

Amazon price targets

At least 17 analysts raised their price targets on the stock, pushing the median view to $154, according to Refinitiv data. That’s an upside of nearly 20% to a stock that has already risen almost 50% this year. Amazon has a 12-month forward p:e ratio of 58.8, much higher than Apple’s 29.5 and the industry median of 14.9.

The iPhone maker warned on Thursday that it was headed for the 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.

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“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.” — Aditya Soni, Samrhitha Arunasalam and Joice Alves, (c) 2023 Reuters