Why Raymond James Hit Amazon With A 'Strong Buy'

• Amazon.com, Inc AMZN shares have appreciated more than 60 percent year-to-date, but have lost 5 percent since July 27.
• Raymond James’ Aaron Kessler upgraded the rating on the company from Outperform to Strong Buy, with a price target of $640.
• The recent pullback in shares offers an attractive entry point, Kessler said.

Analyst Aaron Kessler mentioned that Amazon.com is off to a solid start, as per ChannelAdvisor data. The company’s July same store sales were 30.1 percent y/y, driven by the Amazon Prime day on July 15.

“While we are not anticipating any major economic weakness in Amazon’s core markets, we note Amazon’s growth remained resilient during the last 2008-2009 economic downturn,” Kessler wrote.

Increasing Amazon Prime adoption is expected to result in strong long-term growth as Prime members buy more frequently than the non-Prime members. Kessler added that the company is also witnessing strong Prime growth internationally.

Amazon.com’s North America CSO margins were showing solid leverage, and the margin expansion was driven by improved shipping and fulfillment margins.

Amazon.com’s cloud technologies are poised for strong long-term growth, backed by the expectation of strong demand, expansion into new geographies and several new features. The Raymond James report noted, “[W]e believe there is a high likelihood of upside to our 2015/2016 revenue estimates of $7.6/$10.6 billion (+63% y/y and +40% y/y).”