RBC Capital analyst Mark Mahaney rates stocks in the technology sector and is one of the top 25 analysts rated on TipRanks. Following earnings results, Mahaney has reduced his price targets on online retail giants Amazon.com, Inc. (NASDAQ:AMZN) and Alibaba Group Holding Ltd (NYSE:BABA). Below are the changes along with current ratings and comments.
Amazon shares are falling nearly 8% Friday, after the company reported fourth-quarter results, which were in line with estimates for revenue and EPS, but missed Street expectations.
In reaction, Mahaney lowered his price target from $775 to $715, while reiterating an Outperform rating on AMZN.
Mahaney said, “Is there a problem with AMZN? We don’t think so. After 4 quarters of material bottom-line upside, AMZN printed an in-line quarter. Caused an Aftermarket Expectations Correction, especially after a 9% intra-day share price surge. Here’s why we don’t see a fundamental problem: 1.) Revenue was closest (2.7%) to AMZN Q4 Guide high-end in 5 years. 2.) Q1 Revenue Guide implies almost no change in Y/Y revenue growth, despite a 4 pt tougher comp. 3.) Unit Growth of 26% Y/Y was highest organic growth in over 2 years. 4.) The cause of the heavier than expected Fulfillment & Shipping expenses was a Good Problem – excess demand – and not structural.”
The analyst concluded, “Expectations (including ours) may need to be tempered. But this is temporary. And our ‘Net stock-picking history has taught us that Expectations Corrections can create great Buying opportunities. Based on our ULT reports, we still see AMZN’s Retail Business as being in Prime Flywheel Mode & we still view AWS momentum as one of the most powerful trends in Tech today. AMZN remains our #2 Long in the ‘Net Sector.”
According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Mark Mahaney has a yearly average return of 18.3% and a 57% success rate. Mahaney has a 37% average return when recommending AMZN, and is ranked #10 out of 3594 analysts.
Out of the 32 analysts polled by TipRanks in the last 3 months, 29 rate Amazon stock a Buy, while 3 rate the stock a Hold. With a return potential of 30%, the stock’s consensus target price stands at $762.93]
Alibaba Group Holding Ltd
In addition, Mahaney reiterated an Outperform rating on shares of Alibaba, while reducing the price target to $89 (from $95), which represents a potential upside of 35% from where the stock is currently trading. According to TipRanks, Mahaney has a -16% average return when recommending BABA.
Mahaney commented, “Alibaba has reached a Mobile Monetization inflection point. We believe this means that BABA will be able to sustain premium growth rates in its key Retail segment for the foreseeable future. BABA also continues to demonstrate very high levels of profitability– 55% EBITDA margins and $3.7B in FCF in Dec Qtr. China Macro is a concern, but Internet Secular trends can offset much of this. We still view BABA as a Premium-Growth/ Premium-Profit Asset, with a very reasonable valuation. We also view this as a very effective management team with a sound l-t strategy. Finally, we see BABA as having significant option value in terms of non-retail revenue streams in China, International expansion & a series of major strategic investments.”
Out of the 19 analysts polled by TipRanks in the last 3 months, 18 rate Alibaba stock a Buy, whereas only one rates the stock a Hold. With a return potential of nearly 42%, the stock’s consensus target price stands at $95.94.