Analyst: Here's what Amazon's doing right

Online retailer Amazon still hasn't reported a quarterly profit but it has managed to grow its stock by more than 35 percent this year because of a simple factor, Morningstar Analyst R.J. Hottovy said Friday.

"The company's gotten back to its core business lines," Hottovy said on CNBC's "Squawk Box." "We haven't heard anything from the Amazon Fire phone, which was a disaster last year. They've done a great job making the Prime membership more attractive to customers, but also sellers."

Hottovy said in a note he believes Amazon Prime membership has grown by 60 percent this quarter and now exceeds 40 million.

Another contributing factor to Amazon's recent success is the profitability of Amazon Web Services, which generated revenue of $1.57 billion last quarter, Hottovy added.

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"Although there appears to be some quarter-to-quarter volatility, we find low- to mid-teen margins as a reasonable baseline for AWS, which exceeds cloud computing industry averages. In our view, this confirms that AWS possesses some degree of pricing power and/or scale, which will become more meaningful as it becomes a larger part of the business mix," he said.

—CNBC's Toby Taylor contributed to this report