In a research report released today, RBC Capital analyst Mark Mahaney reiterated an Outperform rating on shares of Amazon.com, Inc. (NASDAQ:AMZN) and raised the price target to $705 (from $650), based on proprietary survey of Amazon “Prime Flywheels” and RBC’s updated long-term retail EPS power analysis.
Mahaney wrote, “Third annual Amazon consumer survey highlights flywheels: 1. Amazon dominates u.s online retail. 2. satisfaction remains very high, with purchase frequency & spend rising. 3. prime adoption ramping rapidly. 4. prime members materially more loyal than non-prime. 5. older prime cohorts are materially.”
Furthermore, “We believe AMZN’s Core Retail Segment (ex-AWS) can potentially generate $27–45 in EPS within 10 years. Reaching this range implies an Active Customer CAGR of 8–10%, a Revenue/Customer CAGR of 3–4%, and 8–10% Operating Margins. Given our survey work and H1:15 segment results, we have increased confidence in our Rev/Customer and Operating Margin assumptions. And given the multiples of leading consumer stocks, this implies the potential for a materially higher AMZN stock price.”
“Our new $705 price target (from $650) is based on valuing Amazon’s three segments (North America Retail, International Retail. and AWS) on 2017 estimates. We arrive at $220/sh for NA by applying a 30x P/E on EPS of $7.32, $150/sh for Int’l by using 1.5x P/S on revenue of $49B, and $229/ sh for AWS by applying 15x on EBITDA of $7.5B,” the analyst concluded.
According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Mark Mahaney has a total average return of 20.5% and a 61.7% success rate. Mahaney has a 33.2% average return when recommending AMZN, and is ranked #9 out of 3754 analysts.
Out of the 42 analysts polled by TipRanks, 35 rate Amazon stock a Buy, while 7 rate the stock a Hold. With a return potential of 12%, the stock’s consensus target price stands at $583.61.