Argus: Amazon 'Fully Valued,' Worth Buying If It Falls To Low $500s

• Amazon.com, Inc AMZN shares have gained 7 percent since August 3.
• Argus’ Joseph Bonner maintained a Hold rating for the company.
• While Amazon continues to have strong fundamentals and a competitive edge, its shares are fully valued at present, Bonner stated.

Analyst Joseph Bonner mentioned that Amazon continues to move ahead on several critical fronts, including international growth, development of its Kindle/Fire device ecosystem, expansion of Amazon Web Services and the expansion of its Prime membership loyalty program.

Amazon reported excellent 4Q15 results, with revenue growth of 69 percent and a near tripling of its operating income to $687 million from the year ago level of $240 million. The company’s performance was, however, short of market expectations, resulting in a sell-off in its shares after the announcement, Bonner stated.

The analyst believes that despite the sell-off, Amazon’s 4Q results depict the company’s strong fundamentals. Amazon’s strengths lie in its rapid innovation cycle and its ability to leverage existing assets into new businesses and markets.

Bonner pointed out that Amazon had not lost its competitive edge, despite the entry of several new players in the market in recent months. CEO Jeff Bezos expects AWS, which currently accounts for only 7 percent of the company’s total revenue, to be a $5 billion business in the future.

“We believe that AMZN shares are fully valued after their strong showing in the last year. We would like to see the stock pull back to the low $500’s before putting it on the BUY list,” Bonner wrote.