With the S&P 500 on track for its best week of the year, Robert W. Baird analyst Colin Sebastian weighed in with a few insights on the online retail giant Amazon.com, Inc. (NASDAQ:AMZN) and Alphabet Inc (NASDAQ:GOOGL), parent company of Google, with positive ratings.
Sebastian was out with an update on Amazon, straight from re:Invent, the biggest event of the year for AWS. The analyst rates the stock an Outperform, with a $630 price target, which implies an upside of 17% from current levels.
The analyst noted, “Today, Amazon announced QuickSight, a business intelligence tool[..[We highlight this announcement as additional evidence of Amazon moving “up-the-stack,” building off of its leading position in infrastructure-as-a-service (IaaS) into more “value-added” software-as-a-service (SaaS) applications. Amazon has also separately announced other SaaS services such as e-mail (WorkMail), file-sharing (Zocalo), and virtual desktops (WorkSpaces)”
Furthermore, “In terms of assessing how Amazon may evolve its SaaS offering, we point to Google Apps, which offers core products such as e-mail, calendar, file-sharing, spreadsheet, presentation, word-processing and video-conferencing capabilities. While Amazon’s intentions may be to work more in the back end of existing infrastructure, we would not be surprised if Amazon continues to broaden its enterprise offering to include other cloud-based productivity solutions.”
Bottom line: “We view the continued AWS build-out in “value-added” SaaS applications as a net positive that increases the addressable market and enhances customer “stickiness.”
According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Colin Sebastian has a total average return of 18% and a 73.2% success rate. Sebastian has a 35.7% average return when recommending AMZN, and is ranked #35 out of 3772 analysts.
Out of the 43 analysts polled by TipRanks, 37 rate Amazon stock a Buy, while 6 rate the stock a Hold. With a return potential of 11.7%, the stock’s consensus target price stands at $593.30.
Analyst Colin Sebastian reiterated an Outperform rating on shares of Alphabet, with a price target of $780, which implies an upside of 19% from current levels.
Sebastian wrote, “Much attention has already been spent on analyzing the revenue and margin differential between core Google and the “speculative” Alphabet businesses. Core Google margins will be meaningfully higher than consolidated results, but that much was always clear. We believe the bigger picture for investors, however, is to understand the potentially massive new market opportunities being built under the Alphabet hood, such as Nest, Calico/Life Sciences, Fiber, Automotive Technology, Shipping/Logistics, etc. While not a perfect analogy, we would point to GE as one precedent in viewing Alphabet’s opportunities for cross-industry growth; and just as lighting-related products once generated the bulk of GE’s revenues and subsequently served as the foundation for the eventual diversification and dominance in new markets, Google has Search.”
“Beyond a more profitable “core” business, we believe Alphabet warrants a positive valuation, and thus shares still appear undervalued,” the analyst concluded.
According to TipRanks.com, analyst Colin Sebastian has a 18.5% average return when recommending GOOGL.
As of this writing, out of the 45 analysts polled by TipRanks, 42 rate Alphabet stock a Buy, while 3 rate the stock a Hold. With a return potential of 13%, the stock’s consensus target price stands at $740.21.
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