Morgan Stanley is getting more bullish on Amazon shares even after its stunning gains this year.

The firm reiterated its overweight rating and increased its price target to $2,500 per share from $1,850, representing 29 percent upside to Tuesday's close. It is the highest target out of the 41 analysts who cover Amazon, according to FactSet.

At a $2,500 stock price, Amazon would have a market valuation of about $1.2 trillion.

"We have increasing confidence that Amazon's rapidly growing, increasingly large, high margin revenue streams (advertising, AWS, subscriptions) will drive higher profitability and continued upward estimate revisions," analyst Brian Nowak said in a note to clients Wednesday.

Nowak noted that Amazon outperformed the top end of its operating profit guidance by an average of 60 percent during the past three quarterly reports. He predicts the company's high profit margin businesses such as Amazon Web Services cloud computing, subscriptions and advertising will generate nearly $45 billion in profit by 2020 from an estimated $25 billion this year.

Amazon shares closed up 3.4 percent Wednesday. Its stock is up 65 percent so far this year through Tuesday vs. the S&P 500's 8 percent gain.

In another note Wednesday, Nowak also raised Alphabet's stock price target to a Wall Street high $1,515.