Oppenheimer raised its price target on Amazon (AMZN) to $970 from $900, saying the company's 10K filing showed that the returns of its cloud business had exceeded expectations.

CLOUD RETURNS: The returns of Amazon's cloud business, AWS, beat expectations, wrote Oppenheimer analyst Jason Helfstein. Revenue per dollar of capital expenditures on AWS came in at 84c, versus the 70c that had been expected by Oppenheimer's cloud analyst, Tim Horan, according to Helfstein. And while previously Helfstein estimated that each 100,000 square feet of datacenter space generates a return of over 20% for Amazon, the analyst now believes that it yields "marginal returns closer to 40%."

OUTLOOK: As Amazon increases its data capacity, competition increases from Alphabet (GOOG,GOOGL) and Microsoft (MSFT), and prices drop, AWS' margins should drop "somewhat," Helfstein warned. However, the higher than expected margins generated by AWS should mitigate investors' near-term concerns about Amazon's increased spending on its retail business, the analyst stated.

VALUATION, RATING: The analyst raised his estimate of AWS' valuation to $258B from $212B. He kept an Outperform rating on the stock.

PRICE ACTION: In late morning trading, Amazon rose 0.5% to $840.58.