Raymond James Upgrades Amazon.com (AMZN) to Strong Buy

(Updated - August 27, 2015 8:25, 10:30 AM)

Raymond James upgraded Amazon.com (NASDAQ: AMZN) from Outperform to Strong Buy with a price target of $640 (unchanged). In the report analyst Aaron Kessler said with 30% upside to their price target following the pullback, they see an attractive entry point.

The analyst highlighted that 3Q is off to a solid start based on ChannelAdvisor data. Kessler expects Prime as well as continued category and geographic expansion to drive strong long-term retail growth, and said North America margins are at an inflection point driven by increasing scale efficiencies. Finally, he remains positive on Amazon's leading cloud positioning and believes AWS estimates could prove conservative.

"We believe increasing Amazon Prime adoption should continue to lead to strong long-term growth as Prime members typically purchase much more frequently than non-Prime members. Additionally, Prime benefits Amazon by lowering advertising costs as Prime members typically start first at Amazon when searching for products. Amazon has also noted stronger Prime growth internationally and Amazon is seeing accelerating international growth, particularly in its EGM segment, which accelerated 1,100 bp q/q (~1/2 of acceleration was easier Japan comp)," said Kessler.

"North America CSOI margins showing solid leverage as evidenced by the 210 bp y/y margin expansion in 2Q to 5.1% driven in part by improved shipping and fulfillment margins. While International margins remain at ~ breakeven given continued high levels of investments, we believe International should be similar to North America longer-term," continued the analyst.

Kessler added, "Gartner’s 2015 survey of CIO investment priorities shows top investment areas – business intelligence/analytics, data, ERP, and mobile – that are best served by cloud technologies. With ~350 new features launched YTD, material interest in the Aurora database, and expansion into new geographies (e.g., South Africa, India), we believe there is a high likelihood of upside to our 2015/2016 revenue estimates of $7.6/$10.6 billion (+63% y/y and +40% y/y)."

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 $500.77 yesterday.

You May Also Be Interested In

• BofA Securities Upgrades Tesla (TSLA) to Buy on wind up of positive catalysts
• Amazon (AMZN) Bedrock Launches New Capabilities as Tens of Thousands of Customers Choose It as the Foundation to Build and Scale Secure Generative AI Applications
• Goldman Sachs Upgrades Bank Central Asia Tbk (BBCA:IJ) (PBCRY) to Buy