Shares of Amazon.com (AMZN) are up 82 cents, or 0.4%, at $217.05, and were as high as $221.60 earlier in the session, after Stifel Nicolaus’s Jordan Rohan this morning raised his rating on the shares to Buy from Hold, with a $280 price target, writing that the company looks set to scoop up more share of retail in a tough economy given “its low cost position.”
Rohan raised his estimate for this year to $48.8 billion in revenue from $48.6 billion, while cutting his EPS estimate to $1.92 from a prior $1.98, and raised his 2012 estimate to $64.8 billion in revenue and $3.41 per share from a prior estimate of $62.1 billion and $3.11 per share.
Even with economic malaise, the company will do better, he expects, than it did in the worst period of the last recession:
We are more comfortable that Amazon can continue to grow 30%+ organically for the next two years, even in a low or no-growth environment. From 3Q08 to 3Q09, FX-adj growth moderated to the upper 20% range, with a trough of +20% in 2Q09. The company is stronger now and, barring consumer retrenchment of this magnitude, growth of 30% or more appears achievable. We are increasing our forward estimates accordingly.
As for the company’s new tablet computer, the “Kindle Fire,” unveiled last week, it may bolster the company’s subscription offering, Amazon “Prime”: “The Kindle Fire, while dilutive on a per unit basis, could help Amazon catch up to existing distributors of digital media, and may reinforce the advantage Amazon enjoys with Amazon Prime.”
Rohan’s $280 target is a mix of valuations, including 1.4 times forward estimated sales, and a 4% projected free cash flow yield, using 2013 estimates.
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