Amazon.com, Inc. (NASDAQ:AMZN) stock touched another fresh high briefly Monday before dipping back into the red following another price target increase.
Oppenheimer Holdings Inc. (USA) (NYSE:OPY) analysts are the latest to push a price target of more than $1,000 for Amazon stock, as they boosted their price target from $970 to $1,100.
Meanwhile, Amazon’s new transparency efforts are driving some hard looks at its margins.
In a note dated May 15, Oppenheimer analyst Jason Helfstein raised his price target and reiterated his Outperform rating on Amazon stock.
He sees the stock as a “‘must own’ within large-cap” but warned that Street estimates for the company’s margins might be too aggressive.
He noted that Amazon management guided for a decline of 217 basis points in second quarter margins due to ongoing investments in several areas. However, the Street is projecting an increase of 122 basis points.
Among the areas the online retailer is investing in are and home décor/ furniture infrastructures, Amazon Prime in , China and Mexico, research and development for Alexa, video content, Prime Now, Prime Music, and the adtech business.
Bank of America Merrill Lynch analyst Justin Post reiterated his Buy rating and $1,150 price objective on Amazon stock in his own May 15 note. He noted that the company’s new disclosures of third-party revenues and subscriptions offer a glimpse of its potential long-term margins based on comparable margins within the industry.
However, he added that there are limitations to any margin projections because the company’s consumer businesses “require investments in one area (such as Prime content) to drive growth in other businesses (such as 3P sales).”
Despite the limitations, he felt there was value in estimating margins and believes that in the long term, the company can run its first-party segment and subscriptions at a breakeven level and still generate a GAAP margin of 6.7%. He believes that third-party Services and advertisers could be the key to driving overall profits in the long run.
He also feels that investors will continue to be willing to let Amazon pass without profits as it reinvests everything, but only if its growth trends “remain intact.”
Amazon Stock Target: $1,095 Per Share
Wall Street has been playing a for Amazon stock. Last week, MKM Partners analyst Rob Sanderson joined the
by raising his target from $995 to $1,095. He also noted that the online retailer was continuing its heavy investment spending with a focus on Prime Video, devices and technology, fulfillment centers, international markets, Amazon Web Services, and such as artificial intelligence and robotics.
Despite these heavy investments, he still sees “significant earnings power potential,” he said in a May 8 note. He also highlighted third-party sales, Fulfillment by Amazon, advertising and AWS as sources of higher margin revenue, adding that they are growing much faster than the overall company.
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