UPDATE: Citi Upgrades Amazon.com (AMZN) to Buy; Analyst Points to Top-line Growth

(Updated - January 13, 2015 9:04 AM EST)

Citi upgraded Amazon.com (NASDAQ: AMZN) from Neutral to Buy with a price target of $354.00. Analyst Mark May noted attractive valuation, top-line growth, and more stable margins.

"We are upgrading Amazon to Buy for three main reasons: 1) We believe Amazon’s valuation represents a good risk/reward as we see valuation support near $300 and upside to at least $354 without assuming multiple expansion; 2) When looked at on a gross profit basis, top-line growth has remained strong (e.g., retail segment GP +25% in CY14), and Q4 online holiday datapoints seem to bode well for 4Q14 results; and, 3) We believe margins can reverse the recent trend and rise in CY15 as we do not expect the multiple factors that came into play in 2014 to worsen in 2015. Despite adjusting estimates for FX, our target increases to $354 as a result of shifting the calendar forward," said May.

Expanding on the topic of top-line growth, May added, "Investors still focus on revenue growth as the key indicator of top-line health, but the mix to 3P sales (which are recorded net) and the AWS price cuts (which impacted total rev growth in CY14) result in this being misleading and gross profit a better measure. We estimate that Retail segment gross profit growth has remained significant (e.g., 25% in CY14) and above industry growth. In addition, recent datapoints suggest a solid 4Q14 holiday e-commerce spending, which could bode well for Q4 results."

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 $291.41 yesterday.

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