Amazon: 1.5% Is 'Good Enough'
Amazon Web Services, Amazon's cloud services offering, continues to prove strong, which Nomura analyst Brian Nowak cited as a major reason for his upgrade.
"After having been on the sidelines since our initiation November, we are beginning to see clouds part in the Amazon investment case as we believe we and the Street are under-appreciating the growing and expansive drivers within Amazon's gross margin," Nowak wrote in his research report. He now rates Amazon shares "buy" with a $285 price target, up from $200.
Capital expenditures are expected to soar in the second quarter, moving to between $800 million and $900 million, up from $386 million in the first-quarter. That's not a fear for Citigroup analyst Mark Mahaney, who raised his target to $275, up from $215.
Mahaney said the long-term thesis is still intact, and Amazon is poised to benefit as it increased investments in mobile, cloud and the company's Local offering. Mahaney noted that Amazon's management team, led by CEO Jeff Bezos has a record of being able to succeed through its investment cycles.
As Amazon continues to invest heavily in its business and watch revenue grow, it seems as if the company's shareholders will accept the razor-thin operating margins.
Jeff Bezos is no stranger to spending the company's cash if he believes it will help the business long term. Amazon shares have gained 254.59%, versus a 19.16% return for the Nasdaq over the last five years, which should keep shareholders sitting pretty.
Amazon shares are soaring in Friday trading, up 13.32% to $221.90.
Interested in more on Amazon? See TheStreet Ratings' report card for this stock.
--Written by Chris Ciaccia in New York
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