Voting is over

Amazon's shares will reach $530 by 09.27.2015
28 august 2015

We are still upbeat about shares of Amazon.com (AMZN), a major global online retailer. The company continues to deliver strong financial results. According to the recently released financial report for Q2 2015, revenue increased by 2.1% q-o-q and 19.9% y-o-y to USD 23.19 bn, outpacing the consensus of USD 22.31 bn. Excluding the adverse impact of exchange rates, revenue climbed by 27% y-o-y. Both goods segment and services segment showed a positive trend over the reporting period, accounting for 74% and 26% of revenue respectively. Transactions in North America accounted for 59% of total revenue, and profit from there was up 2.9% q-o-q and 25.5% y-o-y. The international segment contributed 33% of revenue, falling by 2.3% q-o-q and climbing 3.1% y-o-y (22% y-o-y excluding currency fluctuations).

Notably, the company unveiled results of Amazon Web Services (AWS), a new segment, which is engaged in providing cloud-based Internet services. Profit in this segment jumped by 16.5% q-o-q and 81.5% y-o-y, and its share in the total revenue has reached 8%. Amazon’s management said that AWS now covers 11 regions of the world, and India may become the 12th region in the near future. Currently, the number of subscribers is growing faster than AWS’s revenue, and management expects to see an improving pricing environment in this segment in the second half of the year.

Amazon's gross margin rose to 2.38 pps q-o-q in Q2 and 3.89 pps y-o-y to 34.6%. At the same time, net costs of delivery of goods and services fell to 4.4% of sales from 4.8% in the previous quarter and 5% in the same quarter last year. Operating profit was USD 464 mn compared to USD 255 mn profit in Q1 and USD 15 mn loss in Q2 2014. As a result, operating margin increased by 0.88 pp q-o-q and 2.08 pp y-o-y. Quarterly EPS was 19 cents, while the Wall Street analysts expected a loss of 15 cents.

Amazon’s management released an upbeat forecast for Q3. Revenue is expected to reach USD 23.3-25.5 bn (up 5.2% q-o-q and 18.6% y-o-y from the midpoint of the range) compared to the consensus of USD 23.8 bn. Operating profit, including executive compensation in the form of shares and amortization of intangible assets in the amount of USD 580 mn, is projected in the range from - USD 480 mn to + USD 70 mn.

We left our target price of Amazon’s shares unchanged at USD 550 and confirm a Buy recommendation in the mid-term. The short-term technical target is USD 530.

Answered:
8 people

Amazon's shares will reach $530 by 09.27.2015

Voting is over
Waiting for
the right answer
Agreed
8 people
Disagreed
0 people