Amazon.com, Inc. Hooks a Price Target Lift Following Impressive 4Q Show

Oppenheimer's Jason Helfstein now bets on a return potential of 17% for Amazon shares, commending a robust growth narrative.


Amazon.com, Inc. (NASDAQ:AMZN) has one bull getting even more bullish on the e-commerce giant on the heels of Thursday’s standout fourth quarter earnings beat.

Oppenheimer analyst Jason Helfstein cheers that Amazon’s “secular growth story continues” with a “stellar” fourth quarter showcase.

In reaction, the analyst reiterates an Outperform rating on AMZN stock while hiking the price target from $1,450 to $1,650, which implies a close to 17% upside from current levels. (To watch Helfstein’s track record, click here)

For the fourth quarter, Amazon beat out the analyst’s expectations by 2% and the Street by 1%. North America revenue benefited from a robust holiday season performance, surpassing the analysts’ forecast by 1% and the Street by 3%. International revenue outclassed Heflstein’s projection by 5% and the Street by 1%. Helfstein is paying special attention to “strong 2017 Prime growth” from the giant.

Operating Income shot ahead 83% ahead of the analyst’s estimate and 41% past consensus. Helfstein highlights, “NA margins 233bps/155bps above Opco/Consensus drove beat, strong top line, operational execution and advertising business called out.” Additionally, Amazon’s headcount rose 66% year-over-year compared to the third quarter’s 77% year-over-year growth.

The first quarter revenue guide for 2018 angles for 22% year-over-year organic growth, not factoring in foreign exchange impact, which mirrors Helfstein’s expectations and jumps past the Street by 1%. EBITDA margins underperformed expectations, as the analyst notes: “Margin step-down vs. 4Q17 driven by q/q volume declines post-holiday season.”

On back of the print, the analyst is boosting his full-year 2018 and 2019 revenue expectations each by 2% thanks to strength in international and Amazon Web Services sales. Pointing out “modestly” improved margins, Helfstein raises his full-year 2018 EBIT estimate by 5% and full-year 2019 EBIT by 6%. Likewise, the analyst is dialing up full-year 2018 GAAP EPS forecasts by 38% and full-year 2019 GAAP EPS by 39% on tax reform, guesstimating a current tax rate of 15%.

On the business front, Helfstein shines light on Alexa for outperforming expectations last year. Whole Foods stock-outs rode a wave of advantageous pricing and rising demand, according to the AMZN management team.

Bottom line, “Amazon reported better than expected 4Q17 revenue and operating margins, while guiding 1Q18 revenue above consensus on lower than expected margins. Drivers of the 4Q margin beat included better revenue, strong operational execution and advertising (‘advertising’ and ‘margins’ likely to be connected in the coming years); while 1Q18 margin guidance was light, we continue to believe investors will weigh revenue growth over margins given the significant number of opportunities. Top 2018 investment priorities called out: AWS infrastructure and sales teams, Prime Video, Prime Now, AmazonFresh and devices,” Helfstein surmises.

TipRanks points to a strong bullish camp taking a confident gamble on this e-commerce king. Out of 36 analysts polled by TipRanks in the last 3 months, 34 are bullish on Amazon stock with just 2 left on the sidelines. With a return potential of 15%, the stock’s consensus target price stands at $1,644.68.