Amazon.com Inc.'s already sky-high share price could rise even higher if the company delivers on expectations that its second-quarter revenue will surge on coronavirus-induced online shopping and a recent boom in cloud computing, experts say.

Any further momentum would underscore the growth of Amazon, which has emerged as a beneficiary of the pandemic that has hit the retail sector hard, forcing store closures and contributing to a spike in retail bankruptcies. Amazon reports its second-quarter earnings on July 30.

Amazon shares have swelled 62.8% year-to-date to close at $3,008.91 on July 24, according to data from S&P Global Market Intelligence. The S&P 500 closed at $3.215.63 on July 24, down 0.5% year-to-date from $3,230.78.

Some analysts say they believe Amazon's stock could climb even higher — to as much as $3,700 or more— if sales continue to grow amid a resurgence of cases in several U.S. states that have reopened, which could boost online buying. Amazon is also poised to benefit from subsidiary Amazon Web Services Inc. which has grown as more companies shift workloads to the cloud. AWS's net sales in the first quarter reached $10.22 billion, up 33% from the year-ago quarter.

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Amazon saw revenue jump 26% in the first quarter, beating analysts' estimates. The company said it expects second-quarter net sales to reach between $75 billion and $81 billion, growing between 18% and 28% compared with the second quarter of 2019. Analysts surveyed by S&P Capital IQ expect second-quarter revenue to reach the higher end of that range, at $81.21 billion, and continue rising to $86.33 billion in the third quarter and $105.78 billion in the fourth quarter.

"COVID-19 has been Amazon's growth hormone," said Tom Forte, an analyst with D.A. Davidson, in an interview.

Revenue over profits

A key metric that investors will be eyeing is Amazon's revenue growth and whether the company can sustain sales momentum in 2020. Daniel Ives, an analyst with Wedbush Securities who has followed tech stocks over the past 20 years, noted that companies like Amazon have become rare growth stories during the coronavirus and that investors are essentially looking past whether the company is missing EPS expectations in the short-term.

"Right now, the Street is focused on growth — not profitability," Ives said in an interview.

Of course, Amazon is not immune to the challenges of running a company in a pandemic. It expects a potential loss in the second quarter as it plans to devote $4 billion or more of its operating profit to pandemic expenses, including virus testing for all employees, providing workers with protective equipment and raising wages. Amazon expects a second-quarter operating profit of between a loss of $1.5 billion and a profit of $1.5 billion, compared to operating income of $3.1 billion in the same quarter a year earlier.

Given that announcement, investors are unlikely to pay too much attention to margins at Amazon, said Mark Shmulik, a vice president and senior analyst with AB Bernstein. "With it already being communicated, I haven't heard a single investor talk about what they expect on an earnings-per-share basis this time around," he said.

That said, a second-quarter loss could cause a dip in the stock price, but it would likely be temporary, said Craig Johnson, chief market technician with Piper Sandler's technical research group. "Even if the numbers come in a little bit weaker, I think the stock is going to be OK," Johnson said. "Investors and portfolio managers specifically can't ignore a stock the size of Amazon that is outperforming the market."

And with the COVID-19 lockdown scenario still playing out and investors giving companies a "hall pass" on profitability across the board, Amazon shares could rise to $3,750 over the next six to 12 months, Johnson said, based on the stock charts he tracks.

He also noted that large-cap stocks like Amazon will also benefit from investors who are likely to begin moving roughly $1 trillion from money market funds back into the stock market. "People were nervous about the markets. They took money out," Johnson said. "Now people are starting to say 'Gosh, I'm missing out, I've got to put some money back to work.'"

Taking stock

Any future stock performance will come on top of a decadelong increase in stock price. According to Market Intelligence, Amazon's shares have risen more than 20-fold, to $3,008.91, as of July 24, up from $134.52 as of Dec. 31, 2009. The stock bottomed out in the early days of the pandemic, and then came then surging back over the next few months, closing above $3,000 per share for the first time on July 6.

Meanwhile, the stocks of brick-and-mortar rival Walmart Inc., Target Corp.and California marketplace eBay Inc., all of which have benefited from an acceleration in digital sales, have seen their stocks more than double as of July 24 from the start of 2010. Walmart's share price grew to $131.24 as of July 24, up from $53.45 on Dec. 31, 2009.

Fast-growing metrics

Experts say investors will also focus on the fastest-growing aspects of Amazon, such as AWS usage and Prime member engagement online, which could temper or offset concerns over profitability.

Usage rates for AWS increased in the first quarter, as schools use cloud-computing technology to deploy online learning programs and as states like Kentucky and West Virginia address a surge in call volume to unemployment centers. The World Health Organization is using AWS to build large-scale data lakes and aggregate epidemiological country data. Companies including Netflix Inc. also use AWS for cloud services, as does online television streaming services company Hulu LLC and The Walt Disney Co.

Ives, of Wedbush, said he expects AWS usage rates to increase among companies to support their remote workforces with activities such as video-conferencing and cloud storage. Organizations are likely to spend $1 trillion on cloud investments over the next decade, up from less than $100 billion the decade prior, he said. That speaks to the "massive opportunity" for companies like AWS and Microsoft Corp.'s Azure technology to capitalize on, he said. Microsoft's revenue for its fiscal fourth quarter ended June 30 grew 13% year-over-year to $38.03 billion. Demand for its Azure cloud services prompted Microsoft's intelligent cloud segment revenue to grow 17% to $13.4 billion.

Amazon is also expected to continue benefiting from consumers who take advantage of Prime shopping benefits such as free one-day shipping and savings at Whole Foods Market Inc., part of the company's grocery arm.

Brian Olsavsky, CFO for Amazon, said during a first-quarter earnings call that Amazon saw a pickup with Prime customers "shopping more often and they have larger basket sizes." Amazon also increased grocery delivery capacity by more than 60% while expanding in-store pickup services at Whole Foods stores from 80 locations to more than 150 stores.

Potential headwinds

Analysts will also be looking out for any guidance from Amazon about potential losses in the third quarter, which is typically a heavy investment period for the upcoming holiday season, experts say. Amazon has pushed its Prime Day summer shopping event from July to October, moving any gains from that event to the fourth quarter.

"If their operating profit guidance is weaker than what people are expecting, and they are expecting massive losses in the third quarter, that could raise concerns," said R.J. Hottovy, a Morningstar analyst, in an interview. Amazon may continue devoting funds to coronavirus costs in the third quarter, which could cut into profitability.

Shmulik, of AB Bernstein, said investors will also be looking at any color around trend numbers for July, typically a softer month overall but especially now, and whether Amazon is seeing continued growth or a pullback in markets like Europe where the economy is reopening.

"Are they seeing a drop off in some of that volume, or are they seeing that continued growth in sales?" Shmulik said.

Amazon could also face challenges if companies decide to pull back on big investments in cloud computing in a recessionary environment. A weak back-to-school season could put downward pressure on sales and the company's stock as schools turn to online distance learning, Shmulik said.

Shmulik added that he would not be surprised if Amazon and the other tech companies tone down growth figures in their upcoming earnings, given that they are under intense antitrust scrutiny for their growing market power. Amazon CEO Jeff Bezos, along with Facebook Inc. CEO Mark Zuckerberg, Alphabet Inc. CEO Sundar Pichai, and Apple Inc. CEO Tim Cook are slated to testify virtually at a U.S. House of Representatives antitrust hearing July 29.

"It is obviously an election year, and I wouldn't put it past the big tech companies to temper earnings and not appear too powerful," he said.