Despite the 20% decline in Amazon (AMZN) shares over the past six weeks, Piper Jaffray’s top analyst Michael Olson calls AMZN ‘champagne stock on a beer budget’ and says the retail company is trading in line with brick & mortar retailers. Olson suggests Amazon has an opportunity for material appreciation in the coming 12-24 months. With his bullish approach, he reiterates an Overweight rating for the stock with a price target of $2,050.
According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, 5-star analyst Michael Olson has a yearly average return of 16% and a 58% success rate. Olson has a 31.3% average return when recommending AMZN, and is ranked #75 out of 4,887 analysts.
“Our analysis of AMZN valuation suggests the core retail business is trading in-line with low single digit growth brick & mortar retailers (when using valuations in-line with comp group median levels for advertising and AWS). While some investors are disappointed with revenue growth deceleration in Q3 (and implied for Q4), we are encouraged by potential for ongoing margin expansion and bottom line upside,” Olson said.
Amazon beat Q4 op income guidance by 94% (avg) in the past three years, which Olsen says indicates a typical beat would exceed where consensus Q4 expectations were going into the Q3 report. Amazon’s Q4 guidance calls for $66.5 – 72.5 billion in revenue and operating income between $2.1 – $3.6 billion. “While past performance is no indication of future results, if Amazon were to exceed the mid-point of guidance by that 63% ‘low water mark,’ the resulting op income would be 20% above where consensus was prior to the Q3 report; upside consistent with the average beat from the past three years would result in 43% upside to pre-Q3 report consensus op income,” Olson notes.
Olson isn’t the only bull on Wall Street. Amazon stock is nearly uncontested. TipRanks surveyed 37 analysts and out of the lot, 36 are bullish and one is sidelined. The consensus price target stands at $2,164.29. (See AMZN’s price targets and analyst ratings on TipRanks)