Amazon (AMZN) Target Raised to $415 by SunTrust's Peck But Remains on the Sidelines
SunTrust Robinson Humphrey analyst Robert Peck raised his price target on Amazon.com (NASDAQ: AMZN) to $415.00 (from $370.00) following results but stopped short of upgrading the stock and maintained a Neutral rating.
Peck's Points: "1) Total Gross profits grew 29% (ex AWS+Other +25%), with record gross margins at 32% driven by strength in 3P sellers (now 44% of units), as well as EGM; 2) New segment breakout highlights profitability of AWS and improving incremental margins in N. American retail. Management reiterated its focus on investing while improving expense "efficiency"; 3) FCF and Adj. FCF improved as higher operating income was coupled with lower capex (only 3.8% of revs) – we note that we expect investments are lumpy and this is not indicative of lower spending going forward – property acquired via under capital leases was +33% Y/Y. 4) Incremental margins were strong at 7.6% for the core retail business (Media + EGM – AWS – Other). We maintain our Neutral rating based on elevated valuation vs. peers on a FCF basis. We anticipate fierce competition will persist in the ecommerce and cloud markets driving increasing capital needs (logistics, content, storage/compute). We feel the Adj. FCF multiple (accounting for capitalized lease) is too high at >70x 2015E and >40x 2016E (vs. Google (Buy) at 19x and Facebook (Buy) at ~30x). Please see our previous note for a full walk-through of our FCF valuation."
The firm's 2Q’15 revenue/non-GAAP CSOI/EPS goes to $22.3B/ $379M/($0.18) – recall the hit from Fx is ~7.5% - and FY2015 goes to $103.2B/$2.6B/$0.07, with gross profit growth of ~26
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Shares of Amazon.com closed at $389.99 yesterday.