RBC Capital Weighs In on Two Internet Giants: Amazon.com, Inc. (AMZN), Yahoo! Inc. (YHOO)

RBC Capital analyst Mark Mahaney is one of the top analysts on Wall Street covering the Internet sector. His picks average a 20 percent one-year return, and he’s ranked #6 out of 4055 analysts, according to TipRanks.com.

Mahaney came out today with research notes on e-commerce giant Amazon.com, Inc. (NASDAQ:AMZN) and web giant Yahoo! Inc. (NASDAQ:YHOO). Below, the analyst shares his thoughts on Amazon’s recent Prime Day and Yahoo’s upcoming earnings. Let’s take a closer look:

Amazon.com, Inc.

Amazon has recently held its 2nd Prime Day, which the company noted was its biggest day ever, and hosted its AWS Summit in Santa Clara. Mahaney points out that customer orders surpassed last year’s Prime Day by more than 60% and estimates that this drove total GMV to around $1 billion and revenue to around $500 million.

Mahaney wrote, “While these metrics are impressive, in our view, the key metric to understanding Prime Day’s success is the number of Prime members added to the platform, which the company did not disclose. Other notable highlights from Amazon’s 2016 Prime Day: Mobile orders on the Amazon app grew 2x vs. the 2015 Prime Day; Amazon Device sales were up 3x in the U.S.; Amazon sold 2.5x more Echos than on its previous record day; and Amazon sold more than 90,000 TVs on Prime Day. All in, we view this results as relatively consistent with our financial expectations and as representative of the growing ecommerce clout and presence of Amazon and Prime.”

Mahaney reiterated an Outperform rating on shares of Amazon, with a price target of $800, which implies an upside of 8% from current levels.

According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, Mahaney has a 39.4% average return when recommending AMZN.

Out of the 36 analysts polled by TipRanks (in the past 3 months), 33 rate Amazon stock a Buy, while 3 rate the stock a Hold. With a return potential of 11%, the stock’s consensus target price stands at $825.66.

Yahoo! Inc.

Mahaney reiterated a Sector Perform rating on shares of Yahoo with a $38 price target, as the company is scheduled to report its second-quarter earnings results on Monday, July 18th.

The analyst wrote, “For Q2 we are expecting net revenue (ex-TAC) of $836MM, slightly below consensus of $840MM. We are estimating EBITDA of $148MM, in line with the Street, and GAAP EPS of ($0.02) vs. the Street at $0.02. Note that our Q2 revenue and EBITDA estimates are in line with guidance.”

Bottom line: “Based on intra-quarter data points, channel checks, and model sensitivity work, we view Street estimates as reasonable for Q2. In terms of the Q3 outlook, we believe Street estimates are bracketable on both the top and bottom line. However, Street H2 EBITDA estimates – and YHOO guidance – do imply a relatively aggressive recovery in margins.”

According to TipRanks.com, Mahaney has a 2.7% average return when recommending YHOO. Out of the 25 analysts polled by TipRanks, 11 rate Yahoo! stock a Buy, 13 rate the stock a Hold and 1 recommends a Sell. With a return potential of 12%, the stock’s consensus target price stands at $42.20

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