Amazon Analyst Sees 30 Percent Upside on ‘Robust’ Earnings

(Bloomberg) -- Amazon.com shares could rise nearly 30 percent over the coming year as investors pay more attention to its “robust” earnings and margin potential, according to Societe Generale, which started coverage on the e-commerce company with a buy rating and $2,370 price target.

The 12-month target is one of the highest on the Street, according to data compiled by Bloomberg.

Shares of the company dipped 0.3 percent on Monday, but the stock is up about 36 percent from a December low, and it recently traded at its highest level since October. Societe Generale wrote that the current valuation represented “an attractive entry point.”

“The most remarkable progress at Amazon over the last few years has been the large jump in profitability,” analyst Arnaud Joly wrote to clients, crediting the company's advertising and Amazon Web Services cloud-computing divisions. “We think investors may pay more attention to earnings growth at Amazon rather than focusing solely on top-line momentum.”

Amazon has posted a surge in profitability in recent years. In the company's latest quarter, it posted earnings of $6.04 a share, up from $2.16 a share in the year-ago period.

Societe Generale expects earnings will grow at a compound annual growth rate of 32 percent between 2019 through 2021. It also sees “strong potential to further improve margins on the back of growing scale, efficiency gains,” and developing business-to-business services.

According to data compiled by Bloomberg, 48 firms have the equivalent of buy ratings on Amazon, while just one has a hold rating and one recommends selling the stock. The average price target is $2,125.

To contact the reporter on this story: Ryan Vlastelica in New York at rvlastelica1@bloomberg.net

To contact the editors responsible for this story: Catherine Larkin at clarkin4@bloomberg.net, Steven Fromm

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