Why Amazon's stock keeps hitting all-time highs

Amazon stock hitting all-time highs

Another day, another reason for Jeff Bezos to smile.

The founder of Amazon.com has seen his company's stock hit all-time highs three times this week — most recently an intraday high of $837.50 on Thursday — largely on the back of a number of positive analyst reports, some of which dramatically raised price targets for the e-commerce, cloud and media giant.

While a company's stock price can be affected by all sorts of things — not all of them consistent, or rational — there are plenty of reasons why the shares would be peaking right now.

In short, Amazon has a lot of wind at its back.

Prime is growing like gangbusters

Amazon's Prime service — which gives subscribers free shipping, as well as access to Amazon's television shows, movies and music for $99 a year — is growing like crazy.

Cowen and Co. estimated this week that subscribers grew to 49 million in August, and said that the pace of growth shows signs of accelerating. (It has a price target of $960. Amazon was trading around $833 midday Thursday.)

It's a virtuous cycle. Customers feel like they need to take advantage of the service so they order everything on Amazon. The more customers that join, the more Amazon and third-party merchants add products to the service. There really is no competition. That, plus Amazon keeps adding top-quality original TV programming, which is a further enticement.

The cloud

Amazon Web Services is growing so fast — and is so profitable — that for first time Bezos has real margin to play with. (That business sold $2.89 billion in the second quarter of this year.)

That means Amazon can keep putting price pressure on Google and Microsoft — both of which are trying to grow their cloud businesses — and still have profit to reinvest in e-commerce infrastructure.

It doesn't hurt that the cloud business means investors see Amazon at least partially as a software company — and are thus willing to pay a higher multiple for the stock. Amazon now trades at 3.3 times revenue, compared to its average price-to-sales ratio of 2.3 over the past five years, according to FactSet.

Holiday retail

The company is grabbing more e-commerce market share ahead of the holidays — which is a bigger deal every year, with mobile shopping becoming easy and mainstream. (Forrester estimated that Amazon accounted for roughly 60 percent of all online sales growth in the U.S. in 2015.)

Amazon's investments in shipping and trucking mean that people can wait until right before the holidays and still get whatever they want on time.

This is to say nothing of the successful home-grown devices, like the Echo, which is flying off shelves. (The failure of the Amazon Fire phone clearly did not deter the company.) On Amazon.com's best-sellers in the electronics category, 9 of top 10 items are Amazon products.

Its investments in tech are paying off

The company's investments in machine learning and infrastructure mean that Amazon is only going to get better about anticipating what you want, and get it to you faster.

Building on these investments will be key to Amazon's future success, according to a recent note by Evercore. "This stands to drive not only greater overall customer satisfaction through shorter delivery times, narrower delivery windows and lower overall delivery costs, but operating margin expansion for Amazon as well," analysts said in the note. (Evercore increased its price target to $1,015.)

Also worth mentioning, economic data have favored the stock recently.

Amazon is right at the intersection of two swelling industries, consumer and technology. Consumer confidence hit its highest level since the recession, a report said Tuesday, when Amazon bounced more than 2 percent, and consumer discretionary stocks led the to close more than 13 points higher. Meanwhile, the technology sector is on pace for its best quarter since the end of 2013, up 12 percent so far.

— CNBC's Anita Balakrishnan contributed to this report.