Commenting on Amazon.com, Inc.'s [stckqut]AMZN[/stckqut] first quarter results, MKM Partners said the pace of investment spending by the online retail behemoth isn't moderating and investors are supportive.
Analyst Rob Sanderson dwelled on the company's heavy investment in Prime Video, devices and technology, fulfillment capacity, international markets, AWS and other innovations in areas such as robotics and AI. The analyst said investors continue to be supporting of these multi-billion dollar investment areas, placing a significant amount of trust in the business model and the management.
Outlining the reasons for investor faith in the company's massive capital spending, the analyst said:
- The major opportunities are large and tangible.
- Amazon is in a strong market position.
- Management's track record is very good.
"We view this as a highly unusual position for any company and a significant advantage that AMZN has over competitors also eyeing these large opportunities," the analyst commented.
MKM Partners sees significant earnings power potential, especially as higher margin revenue sources like 3P, FBA, advertising and AWS are growing significantly faster than the overall business.
The Best Long-term Growth Opportunity
MKM Partners said, "Our view on AMZN has not changed, we consider the company the best long-term growth opportunity available to investors today.
"While investors continue to be supportive of heavy investments, we do think the stock is increasingly risky as it continues to reach new highs and the profit cycle continues to push further into the future."
The firm increased its price target for Amazon shares from $995 to $1,095, seeing potential for 15 percent upside over the next year. The rating was maintained at Buy.
Rather than buying aggressively at these levels, the firm recommends adding to positions on market volatility. I, on the other hand, suggest that you simply buy the stock and hold on to it until it significantly dips or until you need to reduce your holdings due to over-exposure.