Amazon Shows Continued Growth
Amazon.com, Inc. (NASDAQ:AMZN) shares tick higher in Friday’s trading session, following solid first-quarter results, which topped Street expectations on all metrics. Total revenue increased to $35.7 billion, ahead of Street estimates of $35.3 billion. In addition, Amazon guided second-quarter revenue guidance of $35.25-$37.75 billion, which is in line with Street estimates of $37 billion.
In reaction, Stifel analyst Scott Devitt raised his price target for AMZN to $1,075 (from $1,025), while reiterating a Buy rating on the stock. The new target represents a potential upside of 14% from where the stock is currently trading.
Devitt commented, “Topline momentum remains impressive at Amazon increasing 24% y/y FX-adj. in line sequentially (this quarter was impacted by the compare against leap year). Operating margin declined 90 bp y/y as the company continues to invest in numerous initiatives including Prime, AWS, India, logistics, video and Alexa. We continue to support where the investment is focused and maintain our positive view as we see strong opportunity for successful outcomes. Amazon is well positioned to drive continued growth as the leader in two sizable markets and through the emergence of newer business lines.”
The analyst continued, “As expected, Street estimates are likely to be revised down for the year to reflect the level of near-term investment. Our positive view is unchanged. While near-term margin expansion is limited, Amazon remains well positioned for long-term growth. We recently raised our long-term revenue estimates and target price to reflect: (1) momentum in U.S. eCommerce sales which are benefiting from traditional retail dislocation; (2) the growing Prime member base; (3) continued momentum in AWS; and (4) the emergence of non-retail business lines.”
According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Scott Devitt has a yearly average return of 19% and a 74% success rate. Devitt has a 26.8% average return when recommending AMZN, and is ranked #77 out of 4571 analysts.
Out of the 42 analysts polled by TipRanks, in the last 12 months, 38 rate Amazon stock a Buy, while 4 rate the stock a Hold. With a return potential of 10%, the stock’s consensus target price stands at $1040.84.
The Road Ahead for Snap Holds Challenges to Overcome
In a research report issued Friday, Canaccord analyst Michael Graham initiated coverage on shares of Snap Inc (NYSE:SNAP) with a Hold rating and price target of $22, which represents a slight downside potential from current levels.
Despite the generally positive setup, Graham sees a few challenges for Sanp such as (1) slowing user growth, (2) ad model may evolve in a lumpy fashion, (3) Facebook/Instagram competition, and (4) lack of profitability.
Graham wrote, “We are fans of the Snap platform and believe it will become much more mainstream. That said, while Snap’s relevancy is very high with young, domestic audiences, the platform may need to evolve to resonate with older and international crowds. The most important near-term metric is likely DAU growth, and if the company can shake off the Q4 deceleration and show progress in Q1, the stock should benefit. Beyond that, monetization needs to expand as quickly as we have ever seen to achieve the revenue growth and operating leverage reflected in our model, and this carries significant execution risk. We also see a few hurdles for Snap to cement its position as a viable second-source to Facebook within the fast-growing social advertising landscape.”
As usual, we like to include the analyst’s trackrecord when reporting on new analyst notes. According to TipRanks, analyst Michael Graham has a yearly average return of 10.9% and a 60% success rate. Graham is ranked #173 out of 4571 analysts.
Out of the 37 analysts polled by TipRanks (in the past 12 months), 12 are bullish on Snap stock a Buy, 18 are sidelined, and 7 remain bearish. With a return potential of 5%, the stock’s consensus target price stands at $23.31.