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MKM Turns More Bullish On Amazon, Lifts Price Target To $1,750

MKM Turns More Bullish On Amazon, Lifts Price Target To $1,750, Inc. (NASDAQ: AMZN)'s fourth quarter earnings report demonstrated its "strength" and prompted MKM Partners to revise its price target "significantly higher."

The Analyst

MKM Partners' Rob Sanderson maintains a Buy rating on Amazon's stock with a price target boosted from $1,350 to $1,750.

The Thesis

Amazon's fourth quarter earnings emphasized the case to be incrementally bullish on the stock, Sanderson said in a note. The company's highest margin categories, including 3P seller services, subscriptions, AWS, and advertising, grew by 45 percent in the quarter and 43 percent for the full fiscal year. These segments also accounted for 36 percent of the company's total business mix in 2017, which marks an increase from just 23 percent in 2014.

The improved business mix resulted in a "meaningful" gross margin expansion of 200 basis points in 2017 and 1,000 basis points since 2013, Sanderson said. Gross profit dollars expanded by a factor of 3.25 times over the same four-year period, which emphasizes the "significant earnings power the company is gaining."

Given the company's ability to demonstrate its momentum, investors will "continue to be supportive" of Amazon's high level of investment spending ahead, the analyst said. Over the long-term this should help Amazon achieve an EPS of $78 in 2022, which marks an uptick from a prior estimate of $66 per share.

Price Action

Shares of Amazon were trading higher by 1.7 percent at $1,494.62.

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Latest Ratings for AMZN

Apr 2021Credit SuisseMaintainsOutperform
Apr 2021Evercore ISI GroupAssumesOutperform
Feb 2021CitigroupMaintainsBuy

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