In a research report issued Friday, Aegis top analyst Victor Anthony initiated coverage on shares of Amazon.com, Inc. (NASDAQ:AMZN) with a Buy rating and $953 price target, which represents a potential upside of 18% from where the stock is currently trading.
Anthony provided three main reasons for his bullish stance:
- +20% Top-Line Growth is Expected – Anthony expects Amazon’s investments in Prime, infrastructure, devices, digital content, AI, and newer areas such as groceries, efforts with CPG and in categories such as apparel, to strengthen its competitive moat and allow it to continue to take share from traditional retail. AWS for its part, given its early lead, and competitive strengths, and investment in infrastructure and innovation, should continue to grow its revenues at a fast rate. The combination of the core and AWS should allow Amazon to grow its top line at a 22% CAGR over the next two years.
- Margins Expansion – Anthony is projecting a further, steeper decline in margins in 4Q16. However, while in past investment years the analyst has seen margins degrade for a sustained period, he now expects overall margins to expand at a measured pace over the next two years. His confidence comes from a deep dive into Amazon’s margin levers.
- Growing Free Cash Flow – The analyst expects free cash flow per-share to continue to increase. Anthony estimates that free cash flow per-share will grow at an 18% CAGR from $18.09 per share in 2016 to $25.27 pershare in 2018.
According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Victor Anthony has a yearly average return of 12.3% and a 66% success rate. Anthony has a 34.6% average return when recommending AMZN, and is ranked #92 out of 4365 analysts.
Out of the 42 analysts polled by TipRanks, 39 rate Amazon stock a Buy, while 3 rate the stock a Hold. With a return potential of 16%, the stock’s consensus target price stands at $939.