Goldman Sachs Upgrades Amazon (AMZN) to Conviction Buy
- Top 10 News for 9/26 - 9/30: Deutsche Bank Soars on Settlement; Twitter Back in the M&A Fray; Nike 'Just Didn't Do It' in Q1
- Wall Street rallies, led by Deutsche Bank, financials
- Viacom (VIAB) Forms Special Committee; Will Explore Potential Combination with CBS (CBS)
- Deutsche Bank (DB) Said Near $5.4B Settlement with U.S. - AFP
- Oil up second straight month on OPEC-fueled rally
Goldman Sachs upgraded Amazon.com (NASDAQ: AMZN) from Buy to Conviction Buy with a price target of $400.00 (from $430.00). Analyst Heath P. Terry thinks high capital returns outweigh margins worries.
"We are adding Amazon to the Conviction List as we believe it represents one of the best risk/reward propositions in the sector following the recent sector rotation. While concerns over Amazon Web Services (AWS) pricing, slowing Media growth, and ongoing margin pressures are likely to persist, we believe – given its track record of delivering consistently high returns on invested capital – the ongoing investment in fulfillment and infrastructure will widen Amazon’s competitive lead through initiatives such as Fresh, AWS, digital media, and faster fulfillment and product availability, driving incremental growth and, ultimately, profitability," said Terry.
"While capex at Amazon has risen ~10X over the past five years compared to revenue growth of ~4X over the same period, its cash returns on invested capital, 39% in 2013, have consistently been among the highest in Internet and well above that of other sectors (Exhibit 1). We believe that context is critical when factoring in the operating margin compression driven by this investment," added the analyst. "We see Amazon’s investment in AWS, Fresh (and the fulfillment infrastructure that comes with it), and hardware (with the digital media ecosystem it enables) as driving incremental growth and furthering Amazon’s high returns, given the margin profile of those businesses at scale. Meanwhile, the acceleration in the EGM business is, we believe, more indicative of the direction of the core retail business."
Shares of Amazon.com closed at $332.41 yesterday.
Serious News for Serious Traders! Try StreetInsider.com Premium Free!
You May Also Be Interested In
- BMO Capital Reiterates Outperform on Pepsi (PEP) Following Solid 3Q
- Global Blood Therapeutics' (GBT) GBT440 Has Potential for Peak Sales of $2.7B, Says Wells Fargo; Analyst Initiates Coverage at 'Outperform'
- RBC Capital Raises Price Target on Costco Wholesale (COST) Following 4Q Report
Create E-mail Alert Related CategoriesAnalyst Comments, Analyst EPS View, Analyst PT Change, Hot Upgrades, Upgrades
Related EntitiesGoldman Sachs Conviction Buy List, Goldman Sachs
Sign up for StreetInsider Free!
Receive full access to all new and archived articles, unlimited portfolio tracking, e-mail alerts, custom newswires and RSS feeds - and more!