Credit Suisse Modeling For Amazon Shares To Be Around $1,350 By End Of 2018

Analysts at Credit Suisse felt it prudent to rebuild their valuation model on Amazon.com, Inc. AMZN as the Street is likely missing out on a working capital benefit from a more rapid growth of Amazon's third party gross merchandise value and the positive impact on free cash flow.

Credit Suisse's Stephen Ju also noted the following factors were taken into consideration in maintaining an Outperform rating and $1,100 price target on Amazon's stock price with a year end 2018 target of $1,350.

• Regional 1P and 3P gross merchandise value forecasts.
• Square footage based fulfillment expenses.
• Rebuilt Prime and unearned forecast.
• Seller Advertising forecast.

The net result of changes consists of a higher than previously expected EBITDA and pro forma earnings per share in 2018 from $25.5067 billion to $25.54 billion, the analyst continued. In fact, the revision also marks the first time in nearly three quarters where Ju's profitability estimate moves higher rather than lower, as the company is heavily investing in content, fulfillment centers and data centers.

"As we have noted previously the strategic and product-driven rationale behind these should already be well-familiar to investors," Ju explained. "And as far as we are concerned, this push to invest should serve as a positive demand indicators across its consumer and enterprise-facing businesses."

Finally, the analyst's long-term investment thesis on Amazon remains unchanged and includes:

1. Margin expansion within the e-commerce segment as the company grows into a larger infrastructure player.
2. Ongoing margin benefits from shipping loss moderation.
3. Upward bias to Amazon's AWS segment as suggested by the ongoing "capital intensity" nature of the business.

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