Although Amazon shares have climbed by more than 100% this year, it’s full speed ahead for Nomura analysts. They raised their target price for the company from $700 to $850 per share based on the opportunities they see in the cloud business, which they have now assigned a higher multiple of 20 times 2017 estimated EBITDA for the segment. Their previous multiple for Amazon Web Services was 16 times.

Amazon.com, Inc. PT Boosted To $850 For Cloud Opportunities

Amazon Web Services the main growth driver

In a report dated Dec. 9, analyst Robert Drbul and his team said they think Amazon’s cloud segment is still its stock price’s main growth driver. They noted that this year brought about a key inflection in widespread enterprise acceptance of public cloud infrastructure. They said more and more companies are recognizing the savings they can have if they use the cloud and have become more comfortable with security.

Also they believe that spending on data centers will speed up again next year, both in enterprise and consumer. They expect growth rates in the double digits beyond next year.

Amazon’s profitability looks sustainable

The Nomura team said because of these two main themes pertaining to Amazon Web Services plus the rapid innovation in the space, Amazon’s expanding sales and margins, and its “marquee customer base,” the company’s profitability improvements look sustainable. They also expect Amazon to continue dominating in cloud services.

They’ve also increased their operating margin estimates for AWS to 25% for next year and 30% for 2017. Their margin estimate increases, which resulted in higher estimates for AWS, were the main drivers of their huge price target increase.

Amazon’s retail segment also to keep dominating

Looking to Amazon’s e-commerce business, the Nomura team said they expect the North America segment will continue growing despite its already commanding lead over competitors. They believe sales for the segment will reach about $100 billion just for North America by 2017, which suggests that Amazon grabs about a 24% share of the e-commerce market in the U.S., excluding automobiles and gas. That’s a meaningful increase from the retailer’s 19% share last year.

The analysts like the company’s increased focus on fashion and its Fresh grocery business. Further, they believe Amazon will keep benefiting from higher and higher percentages of third-party sales with high margins. For Amazon’s North America retail business, they now expect revenues to reach $98.6 billion in 2017.

Shares of Amazon fell by as much as 2.38% to $661.20 per share during regular trading hours today.

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