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Amazon's Q1: A Bullish Sell-Side Reacts

Amazon's Q1: A Bullish Sell-Side Reacts
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US Market Indexes Close Lower Friday, Extending Losses (GuruFocus) Inc. (NASDAQ: AMZN) reported an impressive first quarter Thursday, reinforcing sell-side optimism in the company’s ability to drive continued growth across multiple segments.

Here’s an overview of what analysts are saying after the print. 

The Ratings 

  • Wedbush maintained an Outperform rating on Amazon and raised the price target from $1,750 to $1,800.
  • Stifel Nicolaus maintained a Buy rating on Amazon and raised the price target from $1,800 to $2,020.
  • Credit Suisse maintained an Outperform on Amazon and raised the target price from $1,800 to $1,950. 
  • D.A. Davidson maintained a Buy on Amazon with a $1,900 12-18-month price target. 
  • William Blair maintained an Outperform on Amazon with no assigned price target. 

Voices From The Street

Amazon could continue to deliver “substantial” earnings in the future by growing spending more slowly than revenue, said Wedbush's Michael Pachter. 

“The company has demonstrated that it can deliver significant profits when it chooses to, and we expect management to temper its investment over the next few years, enabling substantial revenue and operating income growth to translate to higher levels of profitability," the analyst said. 

Amazon announced an increase in the annual fee for its Amazon Prime service from $99 to $119, which could drive high-margin incremental revenue, Pachter said. 

“Despite the price hike, we continue to view Prime as an essential service for many consumers around the world, and expansion into and throughout new territories should more than offset any domestic subscriber erosion." 

D.A. Davidson’s Tom Forte also said the price hike could be a bullish signal for Amazon. 

“We view this as a significant sign of strength, as management seems confident in its ability to grow its membership base even at a higher price point."

Stifel analyst Scott Devitt said that even though expansive initiatives in Prime, AWS, India, logistics, video content and Alexa could limit near-term margin expansion, they will ultimately improve the company’s growth potential.

“We support where Amazon’s investment dollars are focused, as we believe this better positions the company for continued market share gains and opportunity for greater margin expansion once the company emerges from the current investment cycle." 

Analysts noted the company’s second consecutive quarter of growth in its cloud computing segment, Amazon Web Services, which grew 48 percent year-over-year. 

Ryan Domyancic of William Blair said success in AWS should ease investor concerns about competition from Microsoft Corporation (NASDAQ: MSFT) and Alphabet Inc (NASDAQ: GOOGL) (NASDAQ: GOOG). 

“AWS is witnessing strong continued usage growth across both new and existing customers. Management highlighted that it is seeing an increased pace of enterprise migrations," the analyst said. 

Price Action

Amazon shares were down 0.36 percent at $1,567 at the time of publication midday Monday. 

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