JPMorgan Has 5 Key Takeaways from Amazon's (AMZN) Strong Quarter

JPMorgan analyst Doug Anmuth reiterated an Overweight rating and $925 price target on Amazon.com (NASDAQ: AMZN) following strong Q2 results. He sees 5 key takeaways:

1) AMZN’s 2Q execution was strong across the board. The company continues to benefit from the AMZN Flywheel, Prime, a growing distribution footprint, getting closer to customers, 3P, AWS…the list goes on. The AMZN story has come together- with profitability.

2) 2Q results and the 3Q outlook reinforce our view that AMZN has reached a level of scale, efficiency, and gross profit dollars that it can continue to invest aggressively in the business while also delivering material profits. 2Q CSOI margins increased 230 bps Y/Y to 6.9%, a level AMZN has not seen since 1Q10.

3) AMZN accelerated overall EGM revenue to 33% Y/Y FXN, led by Int'l EGM at 36% FXN and total unit volume growth at 28%. Int’l is becoming a more important part of the growth story and it remains early in India where we believe AMZN has taken significant share.

4) AMZN is investing more heavily in 3Q in fulfillment centers ahead of the holidays, and streaming video content, as reflected in operating income guidance which we believe would suggest around $1.4B-$1.5B in CSOI at the high end. While some may push back here, we believe the larger FC rollout (18 in 3Q vs. 6 last year) is a bullish sign for future sales volume, and helps ensure that AMZN does not have the same FC capacity problems it had in 4Q15.

5) AWS continues to have strong growth at +58% Y/Y—though perhaps a bit shy of more bullish expectations—and segment margins expanded 900 bps Y/Y to 30%.

AMZN estimates for ‘16/’17 increase 2% / 3% for revenue and and 2% / 6% for CSOI.

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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