UPDATE: Citigroup Initiates Amazon at Buy on Market Leader Position

In a report published Wednesday, Citigroup analyst Mark May initiated coverage on Amazon AMZN with a Buy rating and $340.00 price target.

In the report, Citigroup noted, “We are initiating coverage of AMZN with a Buy rating. Along with Google, Amazon is arguably the highest quality company in the Internet sector considering its consistent innovation and execution, and the size of the opportunities it is pursuing. Our analysis suggests that Amazon's retail business trades at a comparable multiple to retailers like WMT as does its AWS/advertising business to its IaaS, SaaS and advertising comps despite both segments having significantly faster growth and optionality. In addition to multiple expansion as 1) retail margins expand from greater 3P mix and fixed infrastructure leverage in the U.S. and 2) AWS' opportunity/value becomes more transparent, the multiple and earnings could also benefit from emerging initiatives not in forecasts such as AWS private/hybrid cloud services, the Amazon Advertising Platform, AmazonFresh, and Payments by Amazon. Our price target of $340 implies 17% upside from current levels, represents forward multiples of 1.6x EV/revenue, 24x EV/EBITDA and 46x EV/CSOI, and is based on a 5-year revenue CAGR of 17%.”

Amazon closed on Tuesday at $291.53.