Monness, Crespi, Hardt Bullish on Amazon.com (AMZN) Ahead of AWS Summit Online
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Monness, Crespi, Hardt analyst Brian White reiterated a “Buy” rating on Amazon (NASDAQ: AMZN) ahead of the AWS Summit Online that is due to start on Wednesday. Keynote speakers include Peter DeSantis (SVP, AWS Global Infrastructure and Customer Support) and Dorothy Li (VP, AWS BI and Analytics).
“In our view, AWS has proven invaluable in supporting organizations around the world during this pandemic and we expect this crisis to act as a catalyst for faster cloud adoption in the coming years. In the end, we believe Amazon is uniquely positioned to exit this crisis as one of the biggest beneficiaries of accelerated digital transformation,” the analyst said in a memo to clients.
The virtual event comes two weeks after the company reported higher-than-expected AWS sales numbers.
“Given a continuation of strong ecommerce trends during this crisis, AWS reported the lowest growth rate of the three major business segments for the fourth consecutive quarter during 1Q:21. In our view, this was widely expected. However, the YoY revenue growth rate at AWS accelerated sequentially for the first time since 1Q:18, improving to 32% growth in 1Q:21 from 28% growth in 4Q:20. Given the size of AWS at $13.5 billion in 1Q:21 sales, delivering growth at this level is impressive, in our view,” White said in a memo.
“By comparison, Alphabet’s (GOOGL/Buy) Google Cloud experienced a slight sequential deceleration in its revenue growth rate in 1Q:21, falling to 46% ($4.05 billion in sales) from 47% in 4Q:20. Furthermore, Microsoft (MSFT/Not Rated) Azure grew revenue by 46% in constant currency (or 50% reported growth) in 3Q:FY21 compared to 48% constant currency growth (or 50% reported growth) in 2Q:FY21.”
The analyst has a $4,500 per share price target on the Buy-rated Amazon, which signals a 40% upside compared to the current market price. The PT is based on an enterprise-value-to-revenue ratio of a bit over 4x MCH’s CY:22 estimate.
“Although this is above the average over the past six years, we believe the company’s growth path is very attractive across the e-commerce segment, AWS, digital media, advertising, Alexa and more. Also, we expect the COVID-19 to drive accelerated digital transformation, benefiting the company’s business model. Moreover, the company has started to deliver more attractive profit trends over the past couple of years. However, as Amazon continues to aggressively invest back into the business to grow at a rapid rate, the company’s profitability is well below its long-term potential,” he concludes.
Shares of Amazon.com closed at $3291.61 yesterday.
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