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Credit Suisse Still Buying Amazon, Believes Street Continues To 'Mismodel' Against Headline Guidance

Credit Suisse Still Buying Amazon, Believes Street Continues To 'Mismodel' Against Headline Guidance
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Notable earnings after Thursday's close (Seeking Alpha)
  •, Inc. (NASDAQ: AMZN) shares are down 6 percent since December 29. The Stock is down about 10 percent in Friday's pre-market session.
  • Credit Suisse’s Stephen Ju maintained an Outperform rating for the company, with a price target of $800.
  • Although there was a headline miss on CSOI guidance, there is upside to EBITDA and FCF forecasts, Ju stated.

Amazon's results came inline with the firm's estimates, with revenue at $35.7 billion, representing 26 percent growth ex-FX. CSOI came in at $1.75 billion, versus $1.04 billion in 4Q14, and the Credit Suisse estimate of $1.38 billion. CSOI margin was at 4.9 percent, versus 3.5 percent in 4Q14, and 100bps higher than the Credit Suisse estimate of 3.9 percent.

Analyst Stephen Ju wrote, “We are buyers of AMZN shares, as we believe the Street continues to mismodel against the headline CSOI guidance.” He believes the reason for this is that the Street may not be accounting for capital/financing lease as part of CapEx, which results in an “undermodeling” of PP&E assets and D&A expenses, which in turn leads to an “overmodeling” of the CSOI.

Related Link: Amazon Had Its Biggest Profit Ever, But Is Earnings Miss A Sign Of Future Struggles?

Ju mentioned that from an EBITDA/FCF dollars perspective, Street estimates could be revised upwards, with a moderating of total CapEx, including capital/financing lease. He added, “We would hence take advantage of the disconnect in AMZN shares to either initiate/add to positions.”

AWS recorded 69 percent year-over-year growth, versus 78 percent in 3Q15 and 81 percent in 2Q15. Its margin expanded to ~29 percent, from 25 percent in 3Q15 and 17 percent in 4Q14. “Stronger Media revenue was offset by elevated shipping losses (rapid FBA adoption resulting in FC overcapacity and incremental discretionary fulfilment costs) leading to in-line retail gross margin (although expanding +240bps vs. 4Q14),” the analyst said.

The revenue and CSOI estimates for FY16 have been revised from $130.1 billion to $130 billion and from $6.2 billion to $6.7 billion, respectively. The adjusted EPS estimates for FY16, FY17 and FY18 have been raised from $10.30 to $10.84, from $13.50 to $14.98 and from $18.30 to $21.17, respectively.

Latest Ratings for AMZN

Oct 2016Goldman SachsMaintainsBuy
Oct 2016Credit SuisseMaintainsOutperform
Oct 2016Morgan StanleyMaintainsOverweight

View More Analyst Ratings for AMZN
View the Latest Analyst Ratings

Posted-In: Credit Suisse Stephen JuAnalyst Color Long Ideas Reiteration Analyst Ratings Trading Ideas Best of Benzinga


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