After Amazon.com Inc’s (NASDAQ:AMZN) impressive first-quarter results, a host of analysts scrambled to upgrade their forecasts overnight.
Jefferies’ number cruncher Brent Thill hiked his price target for the ecommerce giant to US$1,950 (from US$1,850) as he gushed about the “sustained outperformance of this runaway freight train”, claiming there is still more to come.
READ: Amazon smashes forecasts with 1Q earnings
“Every major segment of the business is contributing, and we see big tailwinds coming behind some of the most meaningful segments including Amazon Web Services, Prime, and the fast-growing advertising business,” he wrote in a note to clients.
As for what to expect for the rest of the year, Thill has upped his forecasts and is now forecasting revenue of US$239.8bn (prev. US$237.1bn) and earnings per share of US$12.77 (prev. US$8.34).
Price hikes won’t affect Prime
Wedbush’s Michael Pachter also increased his target price on the back of Thursday’s earnings to US$1,800 from US$1,750, highlighting the surge in Prime subscribers to over 100mln as one of the key factor for the outperformance.
Amazon is increasing the annual cost of its Prime membership – which includes access to Amazon’s video and music streaming services as well as free deliveries – next month by 20% to US$119 a year.
It is only the second time the price has been raised since Prime was introduced and some commentators have suggested this could be a bad move. Not according to Pachter, though.
“Despite the price hike, we continue to view Prime as an essential service for many consumers around the world, and expansion into and throughout new territories should more than offset any domestic subscriber erosion.
“Assuming the U.S. accounts for 70% of the worldwide Prime subscriber base of over 100mln, the US$20 price increase should drive around US$1.4bn of high-margin incremental revenue, boosting long-term profitability potential.”
The analyst is guiding for full-year earnings of US$11.75 (prev. US$8.08) on revenue of US$238.9bn (prev. US$232.8bn).
AWS, Prime and ad businesses only at ‘day one’
Among the blue-chip brokers, Barclays analyst Ross Sandler was another to boost his price target, up to US$1,700 from US$1,580 – a little more conservative than some others but bullish nonetheless.
He reckons the firm’s valuation is now getting a little “frothy” but kept his "Overweight" rating in place anyway, stating that Amazon’s “strong” execution, combined with its market-leading position continues to separate it from its peers in the large-cap internet space.
Perhaps worryingly for some of Amazon’s retail rivals, Morgan Stanley’s Brian Nowak thinks the company is still just at “day one” with three of its high-margin businesses – AWS, Prime and advertising.
In a note to clients, he added that revenue in all three of those divisions is accelerating, while the nascent ad business is growing at over 70% year-on-year.
With those divisions driving upward revisions to his estimates, Nowak hiked his target to US$1,700 from US$1,550.
Amazon shares opened at record highs of US$1,634.32, although they have since edged back and are currently up 5% for the day to US$1,592.86.
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