Axiom's Victor Anthony Hikes Amazon To $500
In a report published Wednesday, Axiom analyst Victor Anthony maintained a Buy rating on Amazon.com, Inc. (NASDAQ: AMZN), while raising the price target from $460 to $500. The company's high margin profile, growth rates and scale make the stock an attractive asset that is expected to offer SOTP support to the valuation.
"Overall, we are encouraged by Amazon's focus on productivity measures as a signal that they could prioritize investments towards more productive operations, which should lead to improving operating leverage. We believe that the model can grow revenues at healthy growth rates and drive incremental operating margins, all while investing meaningfully to drive growth," Anthony explained.
While announcing its 1Q15 results, Amazon gave some insight into the revenue and margins for AWS, which reaffirmed that AWS is growing at a much faster pace than the retail marketplace, with surprisingly high profitability. AWS was estimated to have a 52 percent share of the infrastructure services market in 2014.
According to the Axiom report, "[H]igh customer switching costs and a high level of service coupled with affordable prices make AWS very competitive in an increasingly competitive space. All that we have seen and heard from customers over the years suggests that a credible case can be made that AWS will not only sustain its market share but also potentially increase it."
In addition, while there have been speculations about a spinoff of AWS, the analyst believes that such an eventuality is unlikely in the foreseeable future. "Nonetheless, we think bulls could continue to hold onto a spin as a future option to enhance shareholder value," Anthony added.
The 2015 and 2016 estimates for Amazon have been raised.
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|Jan 2017||Aegis Capital||Initiates Coverage On||Buy|
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