E-commerce giant Amazon (AMZN) lived up to its own goals for the third quarter, but its the guidance for the current quarter that has investors biting their fingernails. Why? The Q4 revenue guidance was weak in comparison to what the Street came up with. Amazon predicts revenue will be between $66.5 billion and $72.5 billion, which falls short of consensus expectations of $73.79 billion.
Regardless of all the nerves, top analyst Victor Anthony of Aegis Capital holds a positive outlook for the stock — predicting a great future for AMZN down the road. He reiterates a Buy rating for the stock and provides a price target of $2,225, which shows an upside of 49% from where the stock stands currently. In addition, the price target is about 8% higher than it was before.
Anthony doesn’t ignore the warning signs that are invoking fears for investors, however. Let’s look at the numbers. This year online retail growth was 11% year-over-year instead of the 16%-22% range reported in the 2017 quarters. Investors are also concerned that online retail growth for the company will slow to a screeching single-digit stop in 2019. Opex growth for Q3 showed 25% YoY growth as opposed to 40% in Q2 of this year or 50% in Q1. White says it indicates demand could be slowing down. Nevertheless, Anthony says investors who plan on hanging onto the stock need not worry. He points out some positive notes about the company: Prime memberships continue to grow, those who have Prime are spending more each year and Amazon is becoming more of a presence in India. Now to the numbers from Q3:
“Reported total company revenue of $56.576B (+30% YoY ex-FX vs 37% in 2Q18) was 2.5% below our estimate. Online Stores revenue grew 11% YoY ex-Fx, decelerating from 12% in 2Q18, due to a shift of certain digital media content to third-party seller services. Retail 3P grew 32% Ex-Fx, decelerating from 36% in 2Q18. Retail subscriptions grew 52% YoY Ex-Fx, decelerating from 55% YoY in 2Q18. Whole Foods and Amazon’s physical stores contributed $4.248B in revenue in the quarter, down 1.5% QoQ. North American revenue grew 35% YoY Ex-Fx vs. 44% in 2Q18,” Anthony said.
Overall, the top bull says Amazon is still one of the best longer-term values in the tech world and believes the stock will double in value over the next three years. The analyst counts on advertising to be a top contributor to the bottom line and believes 2019 will bring revenue growth of 20% and an EPS of $26.35.
According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, 5-star analyst Victor Anthony has a yearly average return of 16.2% and a 64% success rate. Victor Anthony has a 90% average return when recommending AMZN, and is ranked #54 out of 4,887 analysts.
Word on the Street is that Anthony isn’t the only one betting it all on Amazon. TipRanks reviewed 37 analysts in the last three months. All but one were bullish on the stock. The black sheep is sidelined. Now that’s good vibes. The consensus price target stands at $2,167.65. (See AMZN’s price targets and analyst ratings on TipRanks)