|
 "It's all just working," JP Morgan analysts wrote in a research
note.
"While it's tempting to try to pull out each component of AMZN’s
strong 1Q (and generally recent) performance, we think it's the
combination of many factors - the 'AMZN Flywheel', Prime, a growing
distribution footprint, getting closer to customers, 3P (third
party), AWS … the list goes on."
The "Amazon Flywheel" refers to founder Jeff Bezos' strategy of
offering the biggest selection of goods at the lowest prices and
providing the best customer experience to create a "positive
feedback loop".
Amazon is also known for making bold investments in new business
areas even at the expense of profits - a strategy that is often
criticized by investors.
There was little criticism this time, though.
"We believe these results are further evidence that Amazon's
investment in infrastructure, logistics, and Web services is
accelerating market share gains, cash flow growth and continued high
returns on invested capital," Goldman Sachs analysts wrote in a
client note.
Goldman, which has a "buy" rating on Amazon, raised its price target
to $800 from $720.
Amazon's stock rose as much as 12 percent to $669.98 in morning
trading.
Revenue in Amazon's three main businesses - online retailing in
North America, international online retailing, and cloud business
Amazon Web Services (AWS) - swelled 27 percent, 26 percent and 64
percent respectively.
The company also offered a bright outlook, with revenue guidance for
the current quarter of $28 billion to $30.5 billion, compared with
the $28.33 billion analysts expected.
AWS, launched 10 years ago, delivered more profit in the first
quarter than Amazon's retail business.
While AWS is Amazon's fastest-growing business, Amazon Prime and
Marketplace, where the company acts as a middleman for third-party
vendors, are also gaining momentum.
"On the retail side, Prime is the driver," wrote Macquarie Research
analyst Ben Schachter, who raised his target to $760 from $725 while
maintaining an "outperform" rating.
PRIME TIME
Amazon's Prime loyalty program offers one-hour delivery, original TV
programming and access to digital entertainment products such as
Prime Music and Prime Video for an annual $99.
[to top of second column] |
"In both North America and International, Prime continues to thrive
and we believe continued investment in original content, expansion
in existing markets and the still-large opportunity to add new
markets offers lots of runway," BMO Capital Markets analysts Daniel
Salmon and William Lowden wrote.
BMO, which maintained its "outperform" rating on the stock, raised
its price target to $800 from $700.
At least 22 brokerages raised their price targets, to a median of
$777.50. JP Morgan was the most bullish with a target of $915, an
increase from $822.
At that price, Amazon would be valued at $432 billion, making it the
third-largest U.S.-listed company by market value, behind Apple Inc
<AAPL.O> and Google parent Alphabet Inc <GOOGL.O>, both of which
posted disappointing quarterly results.
At current prices, Amazon is valued at about $317 billion, up about
$35 billion from Thursday's close.
Amazon shares, which have gained 40 percent in the past year, trade
at 98.7 times forward earnings, indicating that investors see huge
potential for more growth. Apple trades at 10.8 times earnings,
while Alphabet trades at 19.9 times.
However, to justify Amazon's current share price, Amazon's earnings
per share will have to grow at a compound annual growth rate of 90
percent over the next five years, according to StarMine. Such
abnormally high growth rates have proven to be difficult to sustain
over long periods.
Of the 44 analysts covering the stock, 39 rate it "buy" or higher
and five "hold", according to Thomson Reuters data.
(Reporting by Supantha Mukherjee in Bengaluru; Additional reporting
by Saumyadeb Chakrabarty; Editing by Ted Kerr)
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