Despite Tough Comps, Bob Peck Impressed With Amazon's Beat

Amazon.com, Inc. AMZN delivered a 2Q16 beat across the board, despite tougher comps, SunTrust Robinson Humphrey’s Robert S. Peck mentioned in a report. He maintained a Neutral rating on the company, while raising the price target from $775 to $800.

Amazon reported robust 2Q results, backed by benefits from Prime Flywheel and Scale. Analyst Robert Peck mentioned the key takeaways from the quarter as:

• Continued acceleration in unit growth, driven by Prime Flywheel and 3P FBA
• 3P sellers contributed ~50 percent of unit sales. Here, Amazon is a fee-based marketplace and also provides logistics and fulfillment services
• Revenue growth came in at ~31 percent y/y. More importantly, gross profit growth was recorded at 40 percent y/y
• International EGM accelerated to 38 percent y/y growth ex-FX, despite tough comp
• North America EGM y/y growth was flat at 32 percent, despite marginal retail growth
• AWS recorded 58 percent y/y top line growth, despite tough comp
• CSOI margins, at 6.9 percent, were the highest since 1Q10 and were driven by North America [6.5 percent], AWS [~30 percent], and International [~1 percent].

Related Link: Amazon Web Services Is Destroying Its Competition

Continued Investments Ahead

Amazon’s 3Q margins are expected to contract y/y and sequentially, mainly due to higher spend on operational ramp, content, AWS and India, Peck said. He added that, in the medium term, the company may continue to invest in logistics, fulfillment centers, AWS infrastructure and expanded solutions, “the yet undisclosed "fourth pillar"” and nascent markets like India.

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