Piper Jaffray Puts Amazon.com, Inc. (AMZN) in the Spotlight Ahead of Q4 Earnings Call


Piper Jaffray analyst Michael Olson is maintaining his long-term bullish stance on Amazon.com, Inc. (NASDAQ:AMZN) as the online and e-commerce giant readies to release fourth-quarter earnings this Thursday, February 2nd.

Cheering Amazon’s retail margins with a positive forecast for significant GAAP operating margin expansion throughout the next few years, the analyst reiterates an Overweight rating on AMZN with a price target of $900, which represents a 9% increase from where the shares last closed.

However, though Olson sees a resurgence in margin expansion in the back half of this year, he also believes the operating margins the Street is currently modeling for the quarter are “overly optimistic.” Additionally, though the analyst spotlights potential upside from Echo sales, he believes the upside is of a “lower-quality” caliber, which investors will not value as much as other marketplace revenue.

“We believe Street estimates are aggressive for Q1’17 operating margins by ~80bps as Amazon’s heavy investments in media, fulfillment, and India ought to carry deleverage through 1H’17. We believe operating margin will expand in 2H’17 and recent investments are not creating long-term headwinds to Amazon’s margin trajectory. We are encouraged by Amazon’s continued direct response to the innovator’s dilemma, rather than rushing to expand margins. Our long-term positive bias keeps us OW through expected lower-than-Street Q1 operating margin guidance; investors are broadly aware of the Street’s aggressive estimates and Amazon’s long-term fundamentals are well positioned, in our view. We believe Amazon will report ~26% retail unit growth (vs. 28% in Q3) and a resulting FXN retail revenue growth of ~24.5%, vs. the Street at 23.5%. We are adjusting our forward estimates for added margin conservatism and FX impact from a strengthened dollar,” Olson concludes.

According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, five-star analyst Michael Olson is ranked #141 out of 4,370 analysts. Olson has a 63% success rate and gains 11.7% in his yearly returns. When recommending AMZN, Olson earns 10.1% in average profits on the stock.

TipRanks analytics indicate AMZN as a Strong Buy. Based on 25 analysts polled in the last 3 months, 24 rate a Buy on AMZN stock while 1 maintains a Hold. The 12-month average price target stands at $943.46, marking a nearly 14% upside from where the stock is currently trading.

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