Amazon is set to release its second quarter earnings report tonight after closing bell, and Wall Street is looking for profits of $1.11 per share on $29.55 billion in revenue. In last year’s second quarter, the online retail and cloud service provider reported earnings of 19 cents per share on $23.19 billion in revenue. Management guided for revenue to be between $28 billion and $30.5 billion for this year’s second quarter.

Amazon Business

Wedbush raises Amazon price target

In a report dated July 25, Wedbush analyst Michael Pachter and team said they increased their price target for Amazon from $775 to $835 per share and reiterated their Outperform rating going into tonight’s earnings report. Goldman Sachs analysts also raised their target recently.

Wedbush notes that the company has been returning uneven profits for years but that it looks finally to be arriving at a place of “substantial earnings growth.” As a reminder, the company reported a substantial earnings beat in the first quarter, marking the first time it has done so following years of investments aimed at future growth. The Wedbush team seems to believe that the future has finally arrived.

They believe expansion in Amazon Web Services and growth in Prime membership drove outperformance in the second quarter. They believe the company might have missed on earnings due to continued investments in more fulfillment centers, film and TV content, AWS and expansion in fresh food delivery. However, they expect earnings of at least $1.04 per share as they believe most of these investments were funded by expansion in categories with high growth and high margins.

Speaking of margins, the Wedbush team expects “sustained momentum” in the area of gross margin expansion. They believe a mix shift toward AWS and Fulfillment by Amazon sales drove this expansion in the second quarter, although higher spending on content for Amazon Prime Video may have partially offset the gross margin expansion. They also warn that if the company “materially” expands its video investments, it would probably underperform sell-side expectations for profits, but they don’t see any reason to believe that this happened in the second quarter.

Amazon Web Services still a focus

Cantor Fitzgerald analyst Youssef Squali and team said in their report dated July 25 that their channel checks during the second quarter pointed to strong growth for Amazon. They note that U.S. e-commerce growth accelerated 600 basis points sequentially to 16% year over year. As such, they believe Amazon’s core U.S. and International retail business remained strong during the quarter. They’re projecting a 25% increase in North America revenue, compared to 27% growth in the previous quarter, and a 19% increase (as reported) for international. They’re projecting a 57% increase for AWS revenues.

Squali is less positive on Amazon’s margins than Wedbush is as they expect pressure to continue. They’re projecting a 2.7% GAAP operating margin, representing an increase of only 70 basis points year over year. He also believes that the company continued to invest in more fulfillment centers, Amazon Fresh, AWS expansion, and video content but also India and China and same-day delivery.

The Cantor Fitzgerald team expects the company’s strong momentum to continue into the third quarter. Consensus estimates suggest $31.63 billion in sales. Squali has a Buy rating and $800 price target on Amazon stock. Shares of Amazon rose by as much as 0.85% to $742.92 during regular trading hours today.