The 'Rare Combination' That Caused Amazon's Stock To Skyrocket
Amazon.com, Inc. (NASDAQ: AMZN) reported phenomenal second-quarter numbers on Thursday, blowing Wall Street's projections out of the water. Gene Munster, Piper Jaffray senior research analyst, was on CNBC Friday to weigh in on Amazon's results.
Upward Margins + Accelerating Unit Growth
"The big kicker here that has put some real oxygen behind the stock is their unit growth has accelerated from 20 to 22 percent, which doesn't sound like much," Munster began. "but when you put in the context that the last time the unit growth grew was in the first quarter of 2012, that kind of changes the dynamic, because you get the force of upward margins plus accelerating unit growth.
"That's a rare combination and that's why the stock is doing what it's doing this morning."
Reason For Staying Positive
Munster was asked if he is positive on the stock. He replied, "Well, this one we have had a lot that we have gotten wrong but we have been working on the right direction on this one, and so the profitability played out. We are hoping for the acceleration in units. And, I think, the important part of this story is that this can continue.
"And the reason is that they have added, we have estimated, about 20 million Prime Users over the last year. They have basically gone from around 30 to 50 million, and each Prime user spends about 3 times as much as a non-Prime user and, so, you start to get the compounding factor over years. That's the reason you stay positive on this," Munster concluded convincingly.
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