SunTrust's Peck Remains on Sidelines Ahead of Amazon (AMZN) Q3

October 5, 2016 7:24 AM EDT
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Price: $811.79 +0.43%

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SunTrust Robinson Humphrey analyst Robert Peck previewed's (NASDAQ: AMZN) Q3 results and bumped his price target to $850.00 (from $800.00). The firm maintained a Neutral rating.

Peck is expecting a strong, but in-line quarter. "Amazon guided to revenue of $31-$33.5B, which implies YoY growth of 22%-32%, vs Street at ~$32.7B, and relative to 31% growth in 2Q'16," he commented. "Top-line estimates appear reasonable, given the Prime flywheel is working, 3P is growing faster than 1P, and AWS adoption continues unabated. The operating income guide implies CSOI of ~$800M-$1.4B, vs the Street at ~$1.4B. We maintain our revenue estimate of $32.9B but raise our CSOI estimate modestly to $1.4B from $1.3B, which implies ~40 bps YoY margin expansion; our estimates are about in line with Street consensus."

While they continue to believe Amazon will benefit from the Prime flywheel, higher 3P adoption, and secular AWS growth. They remain Neutral on: 1) a lot of positive assumptions baked into Street expectations, 2) rising competition, which could impact revenue growth (~20% CAGR through 2020) and op margin expansion (~800 bps), 3) capital intensity is high, and 4) comps will remain tough in the near-term.

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Shares of closed at $834.03 yesterday.

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