Andreas
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Andreas in Gainers & Losers,

Investment idea - Amazon

Black Friday is coming. This year, it takes place on November 27. This is the busiest time for Amazon.com (AMZN), the world’s largest online retailer. According to EMarketer’s estimate, total online sales in the US will increase 14% y-o-y to USD 79.4 bn during the holiday season (November-December). Thus, US customers will continue to shop online instead of visiting traditional retailers. In our opinion, Amazon has every chance of remaining the main beneficiary of this trend. The company expects sales to rise 14-25% to USD 33.50-36.75 bn in the fourth quarter.

Amazon demonstrates impressive financial results. The company recently released a strong report for Q3. Revenue jumped 23.2% y-o-y to USD 25.36 bn, outpacing the consensus of USD 24.85 bn. Excluding the negative effect from currency fluctuations, revenue rose 30%. Revenue from Cloud computing services of Amazon Web Services soared 79% y-o-y to USD 2.09 bn in July-September. The number of cloud service subscribers in 190 countries exceeds one million. It remains the fastest growing segment of Amazon’s business. We expect that heavy investments in cloud technologies will allow the company to further benefit from ever-growing global demand for storage and processing of large information volumes. Operating profit amounted to USD 406 mn vs. USD 544 mn loss reported a year ago. Adjusted EPS reached USD 0.17, while Wall Street analysts expected LPS of USD 0.10. Amazon’s operating cash flow spiked 78% y-o-y to USD 9.8 bn over 12 months ended in September 2015. Net cash flow jumped from USD 1.1 bn over 12 months ended in September 2014 to USD 5.4 bn.

I remain upbeat about Amazon’s shares in the mid-term and raise my target price to USD 700. The short-term technical target is USD 680.