Stifel Upgrades Amazon, Slaps $700 Price Target On 'Bigger, Stronger, Faster' Operations
In a report published Wednesday, Stifel analyst Scott Devitt upgraded shares of Amazon.com, Inc. (NASDAQ: AMZN) to Buy from Hold with a newly introduced $700 price target as the company successfully emerged from its "extensive and extended" investment cycle which yielded a "bigger, stronger, faster company."
According to Devitt, Amazon's second quarter results were a "game changing" event as the print was "well ahead" of the already "heightened" expectations. Amazon demonstrated an overall revenue acceleration along with better-than-expected revenue and margin results in its AWS segment and margin expansion in its international segment.
8 Key Stats
Devitt presented eight key statistics that support his "game changing" thesis: 1) revenue reaccelerated to 27 percent, 2) CSOI (Consolidated Segment Operating Income) margin up to 4.6 percent, 3) North America revenue growth up to 26 percent, 4) North America CSOI margin up to to 5.1 percent, 5) International revenue growth up to 22 percent, 6) strong AWS revenue growth and 21 percent margin, 7) strong free cash flow generation, and 8) return to healthy CSOI.
The lone negative aspect of Amazon's quarterly print involves the company's "lackluster" International CSOI margin. However, the analyst pointed out that this is becoming "less of a drag" on the overall business.
"We missed the turn in the cycle this time but believe the runway is long from here," Devitt wrote. "Amazon's most recent quarterly results were the third consecutive display of more disciplined and focused operating results and the first that showed improvements in growth across each of its business."
Prime Day Should Lead To Growth
Looking forward, Devitt noted that Amazon's Prime Day sales event should provide a tailwind to revenue and Prime membership growth. In fact, the analyst pointed out that during the event, Amazon attracted more new members in that one day than it did in any other day in its history.
Devitt said the increasing mix of higher spend by Prime members creates a "stickier ecosystem" with stronger consumer engagement and should support a "more sustainable" revenue growth.
Bottom line, the suggested that investors buy Amazon shares on any pullbacks.
Latest Ratings for AMZN
|Jan 2017||Aegis Capital||Initiates Coverage On||Buy|
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