Credit Suisse Expects Amazon's Margins to Expand

In a report published Friday, Credit Suisse analyst Stephen Ju maintained an Outperform rating and $449.00 price target on

noting the expectation that margins will continue to expand. On Thursday, Amazon reported fourth quarter and full year 2013 results. The company reported in-line results with revenue up 22% ex-FX and CSOI up 29% year over year. CSOI margin was reported at 3.4% versus 3.2% in the fourth quarter of 2012. Ju noted, “Despite in-line revenue, gross profit dollars once again beat our estimates with Amazon moderating its shipping losses as its footprint continues to bring it closer to the densest areas of population. The add-on program, the rise in the free shipping threshold, and with the company now contemplating a price hike in Amazon Prime for the first time since inception, the likelihood of incremental shipping loss improvements and ensuing operating margin improvement directionally increases and lends upward bias to our FCF estimates.” Credit Suisse FY14 revenue estimate and CSOI remain at $90.6 billion and $3.2 billion, respectively. The analyst decreased his diluted EPS estimate from $2.80 to $2.40. Shares of Amazon closed at $403.01 on Thursday, and is currently trading down 9.11% at $366.31.