Amazon (AMZN) PT Raised to $1050 at Credit Suisse; AWS Worth $200B
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Credit Suisse analyst Stephen Ju previewed Amazon.com's (NASDAQ: AMZN) Q3 results and raised his price target to $1,050.00 (from $920.00) as they roll forward valuation parameters to contemplate end-of-2017. The firm's DCF for AWS now suggests that this asset is now worth $200 billion.
Ju commented, "We believe long term Amazon Web Services (AWS) operating margin expansion potential remains a controversial topic for Amazon. Barring any sharp and sustained decreases in price, we submit that even as we model aggressive SG&A cash expense growth assumptions (add incremental $1.4b-$1.6b over the next five years vs historical ramp of $600mm-$1b), the combination of moderating CapEx and D&A expense growth due to decelerating usage should ultimately lead to 40%+ long term operating margin. This means that within five years, AWS will account for roughly 40% of our consolidated FCF estimate. Given the total addressable market of ~$1t for AWS, we believe that our deceleration expectation could ultimately prove conservative and there remains an upward bias to our FCF projections. As we roll forward our valuation parameters for AMZN to contemplate 2017, our DCF for AWS now suggests that this asset is now worth $200b."
Shares of Amazon.com closed at $822.96 yesterday.
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