Amazon.com (AMZN): Raising PT to $800 - SunTrust

SunTrust Robinson Humphrey analyst, Bob Peck, reiterated his Buy on shares of Amazon.com (NASDAQ: AMZN) after the company delivered a solid 2Q despite tougher comps, with revenue growth accelerating to 31% on the Prime flywheel and AWS, and the highest consolidated segment operating income (CSOI) margin in 6 years. The 3Q guide beat on revenue, but margins are expected to decline on higher operational ramp and content spend in 2H. While the investment cycle may be buoyed by Prime and scale, he believes potential harvest may be impacted by AMZN's mantra of "giving back" to consumers and spend required for LT growth initiatives.

Takeaways include:

1) Unit growth continues to accelerate, driven by Prime flywheel and 3P FBA for expanded customer choice

2) 3P sellers now ~50% of unit sales, where Amazon is a fee-based marketplace that also provides logistics/fulfillment services

3) Revenue grew ~31% YoY; more importantly, gross profits, which we believe is a better proxy for the top line, grew 40% YoY

4) International EGM accelerated to 38% YoY growth ex-FX, while lapping tough comp from the 2Q'14 Japan VAT increase

5) North America EGM maintained its 32% YoY growth, despite only modest retail growth

6) AWS grew top line 58% YoY, down modestly q/q, while lapping tough comp from the 2Q'14 price cuts

7) CSOI margins of 6.9% were the highest since 1Q'10, driven by North America at 6.5%, AWS at ~30%, and International at ~1%

The analyst maintains his Neutral rating, but raises the PT to $800 from $775, which implies 0.7x GMV for retail and 9x Revenue for AWS.

For an analyst ratings summary and ratings history on Amazon.com click here. For more ratings news on Amazon.com click here.

Shares of Amazon.com closed at $752.61 yesterday.

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