Shares of Amazon (NASDAQ: AMZN) slipped around 1.5% in pre-open trading Friday despite a much better-than-expected Q3 earnings report. Increased COVID-related costs and a wide fourth-quarter guidance range is being weighed against the Internet giant's perfect positioning for rising COVID cases in the U.S. and elsewhere.

Amazon smashed earnings estimates by reporting $12.37 EPS vs the Street's estimates of $7.41. Revenue also came in higher at $96.15 billion vs $92.7 billion expected. As for the next quarter, Amazon expects sales to be between $112 billion and $121 billion, which is higher than the expected revenue of $112.3 billion.

“We’re seeing more customers than ever shopping early for their holiday gifts, which is just one of the signs that this is going to be an unprecedented holiday season, Jeff Bezos, Amazon's founder and CEO, said in the statement.

Investors were surprised to see an extremely wide guidance range for the fourth quarter. Operating income is expected between $1 billion to $4.5 billion taking into account an estimated $4.0 billion of costs tied to COVID-19.

A $3.5 billion gap between the top and low end of the guidance range is the highest so far although Amazon is known for wide guidance ranges. In 2019, reported a $1.7 billion gap into its fourth-quarter operating profit projections and $1.5 billion a year earlier.

Shipping costs rose sharply by 57% from a year earlier to $15.1 billion on the pandemic-related challenges.

AWS, Amazon’s cloud-computing unit, reported revenue of $11.6 billion for the quarter which is in line with analysts’ estimates. Operating income came in at $3.54 billion to beat estimates of $3.45 billion.

“Though sectors like travel and hospitality have cut usage/spend, other sectors like videoconferencing and entertainment have strong usage trends, and many companies are accelerating plans to shift to the cloud due to COVID,” BofA’s Justin Post wrote in today’s note.

The analyst increased the price target on AMZN to $3,650.00 per share from $3,560.00 on higher top-line estimates.

“3Q results continue to demonstrate the strong profitability potential in the model when revenues match investments with assets running at capacity. With COVID cases increasing, we like Amazon’s 4Q setup with strong holiday volumes potentially driving margins well above guidance. Amazon remains best positioned for the Online retail and Cloud shifts,” Post added in the note.

In a similar manner, Oppenheimer analyst Jason Helfstein raised the price objective to $3,700.00 per share from $3,500.00 after Q3 results highlighted accelerating secular shift to eCommerce along with stabilizing AWS revenue.

“The company continues to gain share of global eCommerce with its deep product selection, low-cost express delivery through its Prime program, and breakthrough success of Kindle, Prime Video, and Amazon Music. The Whole Foods acquisition creates another leg of growth through CPG/grocery expansion. Furthermore, AMZN's Web Services segment is now the global leader in cloud computing and has significant value,” Helfstein said in a note.