Amazon’s hot streak with profitability has analysts eying the potential for dividends, buybacks

Amazon (NASDAQ:AMZN) rose in early trading on Friday after posting revenue, EPS, and operating income ahead of the consensus expectation of analysts. In general, analysts are buzzing over the Amazon (AMZN) and the potential for the e-commerce stock to see more gains.

Morgan Stanley analyst Brian Nowak said the firm’s concerns about the e-commerce giant’s near-term ability to produce company-wide profit and manage through its investments in lower-priced essentials were overblown. He noted that retail EBIT came in 15% or about $900 million better than expected.

Wedbush Securities analyst Dan Ives highlighted that Amazon (AMZN) has now reported operating income above the high end of its guidance range for the seventh consecutive quarter, and the company has a number of drivers for future margin expansion in place. Ives said those margin drivers include continued cost efficiencies within its fulfillment network, as well as the ongoing mix shift towards higher-margin AWS and advertising revenue.

Evercore ISI analyst Mark Mahaney and his team said they continue to recommend Amazon (AMZN) as a long because they see more room for AWS growth acceleration and Amazon Prime Video monetization is only just beginning. Mahaney also noted that AMZN is tapping into several new promising growth initiatives such as Pharmacy and Kuiper. In an interesting takeaway, Mahaney teased the idea of Amazon (AMZN) paying dividends and firing off new buybacks. “Finally, because as profitability ramps, and AMZN’s cash pile grows beyond $100B, the inevitability of material capital returns rises,” he wrote.

On Seeking Alpha, analyst Abdullah Al-Rezwan highlighted that Amazon (AMZN) has posted another impressive quarter. He pointed out that every part of the AMZN business seems to be trending well, and moving in the right direction.

Shares of Amazon (AMZN) were up 6.9% in premarket trading on Friday.