Amazon (AMZN) PT Raised to $1000 at RBC Capital
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RBC Capital analyst Mark Mahaney reiterated an Outperform rating and boosted his price target on Amazon.com (NASDAQ: AMZN) to $1,000.00 (from $840.00) following their 4th Annual Online Consumer Survey covering U.S., Germany & Japan. They also analyze "4th Pillar Potential" of the company's Alexa/Echo Platform.
Mahaney highlighted the following key points:
Update #1: U.S. Consumer Survey Highlights Faster Flywheels: 1)Stretching its Lead– 89% selected Amazon when asked which Online Retail site they use most, modestly widening its lead over #2, eBay. 2)Purchase Frequency Rising, Satisfaction Remains High– 85% stated they are “Extremely” or “Very” satisfied, translating into higher purchase frequency (47% purchase at least 2-3x/mo., +5pts Y/Y). 3)Prime Adoption Step Change– Survey shows U.S. Prime adoption rose 9pts Y/Y, to 49%. In the U.S., Prime subs likely near 60MM and globally as high as 100MM. 4)Prime Members Becoming More Loyal…Flywheel Spinning Faster– 76% (+1pt Y/Y) state they use Amazon more today than when they first joined.
Update #2: Prime Flywheels Spinning Internationally: 1)Amazon Dominant in Germany; Solid in Japan– Amazon ranked #1 with an 85% response rate in Germany, (24pts above #2, eBay). And #2 in Japan with a 62% response rate, 2pts behind Rakuten. 2)Satisfaction, Purchase Frequency Intrinsically High In Germany; Less Robust in Japan– In Germany, >90% are “Extremely” or “Very” satisfied, translating into relatively high purchase frequency (52% purchase at least 2-3x/mo.). In Japan, 37% are “Extremely” or “Very” satisfied, translating into relatively lower purchase frequency (37% purchase at least 2-3x/mo.). 3)Tho Lagging U.S., Germany & Japan Showing Significant Prime Penetration– Survey shows Prime penetration @28% and 19% in Germany and Japan. 4)Germany, Japan Showing Flywheels– 80% and 62% of Prime custs. in Germany and Japan use Amazon more than when first joined Prime.
Update # 3: “Alexa, Are you Amazon’s 4th Pillar?”– On June 2nd, we published our 4th Pillar report (link here), highlighting 6 potential candidates. We’re now introducing a 7th, Alexa, Amazon’s AI-based Voice Assistant platform. Our survey indicates rising awareness and device ownership among Amazon customers (33% aware; 6% ownership– implying 7MM total Alexa devices sold). And 3rd party apps/skills has tripled since June to 3,000. Alexa may also be stimulating incremental demand (26% of Alexa-device owners use Alexa to purchase items from Amazon “Very” or “Somewhat Often.”) A potential 4th Pillar, indeed!
Update #4: PT Increased To $1,000 Based On Forwarding Valuation Framework To 2018 – Our new $1,000 PT (from $840) is based on a blended average of EV/“Economic” EBITDA, P/FCF, and GAAP P/E. We arrive at $1,000 by applying 18x Target Multiple on 2018E EBITDA of $26.9B, 20x Target Multiple on 2018E FCF of $29.1B, and 40x Target Multiple on 2018E GAAP EPS of $22.85.
Shares of Amazon.com closed at $769.69 yesterday.
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Related EntitiesRBC Capital, Mark Mahaney
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