Amazon shares climbed as much as 3.47% to $518.17 per share in afternoon trading today after Raymond James analysts upgraded them. A combination of positive data and the recent pullback in the online retailer‘s share price was the main driver behind the upgrade.

Amazon’s 3Q doing well

In a report dated today, Raymond James analysts Aaron Kessler and Justin Patterson and associate Yena Jeon said they upgraded Amazon from Outperform to Strong Buy. They see an “attractive” entry point for investors right now and have set a price target of $640 per share, which represents about 30% upside from the company’s current share price.

They note that data from ChannelAdvisor indicates that Amazon’s July same store sales increased 30.1% year over year, beating June’s growth rate of 26.1%.

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A key driver of that increase was Amazon Prime day, which was held on July 15. On that day, Amazon offered deep discounts to Prime subscribers, going even beyond some of the discounts offered on Black Friday last year.

The Raymond James team doesn’t expect to see any major slowdown in Amazon’s main markets, although they do note that the online retailer continued to see strong growth during the last economic downturn, which was in 2008 and 2009.

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Amazon Prime still driving growth

The analysts also expect Amazon Prime to continue driving strong growth at the company’s core. Not only do shoppers pay for an Amazon Prime subscription, but they also tend to spend more on the company’s store because they want to maximize the benefits of free shipping from their Amazon Prime subscription.

The Raymond James team believes Amazon Prime helps the e-commerce giant cut advertising costs as well because often Prime subscribers start looking for items on Amazon before they look at other retailers. Further, the company has seen strong growth in Prime membership internationally, and in turn, international sales growth is accelerating, especially in the electronics and other general merchandise segment.

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That segment alone saw a sequential acceleration of 1,100 basis points. According to the Raymond James team, about half of that acceleration was easier comparable store sales in Japan.

Amazon Web Services also well-positioned

One reason most firms give for being bullish on Amazon is Amazon Web Services, its cloud platform, and Raymond James is no different. They expect the business to continue seeing strong growth in the long term.

They noted that Gartner’s most recent survey of chief information officers about their investment priorities indicated focuses on services which are all best provided through cloud-based technology. The four big areas were business intelligence/ analytics, data, ERP and mobile.

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AWS has launched about 350 new features already so far this year, and there is interest in the company’s Aurora database.

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Additionally, the cloud platform is expanding into new areas like South Africa and India. The Raymond James team sees “a high likelihood” of Amazon surprising to the upside in revenue for this year and next.

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All graphs/ charts in this article are courtesy Raymond James.

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