Amazon Gifts Weigh Down Santa's Sleigh, UBS Upgrades and Raised Amazon's PT

In a report published Friday, UBS analyst Eric Sheridan upgraded Amazon AMZN to Buy from Neutral and raised the PT from $305 to $385. Sheridan's bullish view is based on Amazon's position in multi-channel commerce and noted growth opportunities leading to 20%+ revenue CAGR expectations over the medium term. UBS reported, "Specific drivers for our upgrade: a) our expectations for a reacceleration of revenue growth and paid unit growth in Q4 and beyond (indicators being strong seasonal hiring trends, video game/console sales, easing paid unit comparisons, AWS); b) the globalization of its Kindle ecosystem; & c) its under-appreciated Advertising business." The analyst commented that Amazon is expected to be a globally major player in eCommerce, technology hardware and software, cloud computing, third-party fulfillment, and targeted digital advertising. UBS analyzed strong seasonal hiring trends of an approximate 70,000 employees in the US, Kindle sales and launches, international contributions, hardware launches, and prospects for video game/console sales. Sheridan specifically examined video game and console sales, noting that even though 2013 sales have slowed, "we believe that there could be upside to Amazon's Q4 Media segment sales given the long anticipated arrival of new consoles (Nov. 15th for the PS4 and Nov. 22nd for the Xbox One) and associated new game titles." UBS published expected base sales for FY2014 at $91,191 and FY2015 at $109,535. Gross profit margin is reported at 27.1% and 28.5% for 2014 and 2015 respectively. Sheridan noted that expected revenue for 12/13E is $74,446, a 21.9% change from 12/12. Amazon closed at $310.77 On Thursday.