Amazon.com, Inc. Stock Raised To Buy With Price Target Increased To $550: UBS
UBS has upgraded Amazon to Buy and has also raised its price target on the company’s stock from $450 to $550.
Eric J. Sheridan an analyst at UBC has raised Amazon.com Inc. stock to Buy from Neutral. The analyst is of the view that the company has established a flywheel with its Amazon Prime user subscription growth.
Amazon Prime users grew by over 53% YoY last year. Mr. Sheridan believes this Prime cycle is the beginning force leading to growth of Electronics and General Merchandise revenues. He added, “The resultant increase in Prime eligible product selection will lead to greater site conversion, increased annual spend per customer, and ultimately, higher levels of gross merchandise value for Amazon.”
However, this is not the only opportunity for the e-commerce giant. He has highlighted three major factors behind his enhanced outlook on Amazon.com stock.
- Recent conversation shows that the e-commerce giant is decelerating the expansion of its center mainly due to its expansion in United States is almost completed. The company is planning to launch Amazon Robotics, and UBS suggest that this roll-out might lead to yearly savings of almost $900 million on an average in personnel costs.
- Amazon Web Services growth: UBS sees it as the topmost infrastructure as a Service market.
- Amazon.com has options for its China position.
Because of these factors, Mr. Sheridan has raised his stock price target on the company to $550 from $450. He has also reviewed his estimated for Amazon. Previously, he has estimated a loss of $1.19 per share for the upcoming quarter, and has now changed it to a loss of 80 cents per share. His fourth quarter of fiscal year 2015 estimate goes up to $1.32 from $0.59. Likewise, his fiscal year 2015 earnings per share go to a decline of 11 cents from previous decline of $1.01. He has also increased his sales forecast to $105.2 billion from previous estimate of $102.7 billion. He expects Amazon to report 32.6% of gross margin, as compared to previously estimated 32.4%. His CSOI (Consolidated Segment Operating Income) forecast has increased to $3.3 billion from $2.6 billion.
Mr. Sheridan has also reviewed his fiscal year 2016 estimates. Earnings per share estimate for the period has increased to $3.43 from $1.20. He believes the company to post $126 billion in sales, surpassing his previous top-line estimate of approximately $121 billion. He has also increased his gross margin estimate to 34.9% from 33.3%, and has raised CSOI to $5.6 billion from $4.1 billion.
Amazon shares have increased by 2.20% to $465.57 at market close on Tuesday.
