Amazon's Quarter An A+, Says SunTrust's Peck

In a report published Friday, SunTrust Robinson Humphrey analyst Robert S. Peck maintained a Neutral rating on

, while raising the price target from $475 to $550. The analyst believes that the company's 2Q results were "A+." The company posted top line acceleration, with 27 percent ex-Fx growth, from 22 percent in 1Q15. This growth was driven by the strong acceleration in growth at International EGM and AWS. Amazon also reported 34 percent growth in gross margins, with North American CSOI margins growing by 200bps. The company also reported increased operational efficiency across all its businesses, while Prime Day posted success across all metrics. According to the SunTrust report, "While these results can only be seen as stellar, we think Amazon may be approaching a peak in its typical "harvest vs investment" phases. We believe increased investment will take place in India, video, grocery, services, and of course Cloud." CSOI margins have been improving, year on year, for the last three quarters, and the analyst expects further margin expansion in 3Q15. In the meantime, Amazon's share price has also meaningfully risen. "However, Amazon has a history of "giving back" operational efficiencies to consumers via lower prices, as well as aggressively investing to drive long term FCF growth," analyst Peck stated. The company is expected to take initiatives, such as adding fulfillment centers, expanding in India, adding content to Prime and expanding Prime Now. Amazon is also expected to add new features or functionality, along with geographic expansion, at AWS. This is likely to lead to margins trending down in 4Q15. The revenue and CSOI estimates for 3Q15 and 2015 have been raised.