Yahoo Finance Amazon: Thumbing its Nose at Wall Street’s Conventional Metrics
Amazon.com (AMZN) closed up 7% on Friday despite the broader market’s deep selloff, after announcing blow-out results for 4Q19. The company delivered 20%-plus sales growth and mid-single-digit GAAP profit growth despite higher fulfillment & shipping costs. Services revenue rose a robust 33%, reflecting 30%-plus growth at AWS, third-party sellers, subscription services, and other.
We believe Amazon's long-term success has come from thumbing its nose at Wall Street's conventional metrics. The company's patient approach and unwavering commitment to 'delighting' the customer ultimately led to the profitability that caused AMZN to explode higher in 2017 and 2018. Investors in 2019 similarly doubted the wisdom of Amazon's heavy spending on one-day shipping and Prime Video program development.
Even with a late-year catch-up, AMZN underperformed the market in 2019. That relative underperformance pushed valuations into more attractive ranges. Appreciation to our 12-month target price of $2,250 implies a risk-adjusted return that is greater than our forecast for the broad market and thus consistent with a BUY rating.
Given the company's indisputable franchise leadership, ability to leverage its vendor relationships in the retail space, thriving connected-home platform, and market dominance in Cloud IaaS, we believe AMZN warrants long-term accumulation in most equity accounts.
This excerpt was brought to you by Argus Research using the Research Reports feature available through Yahoo Finance Premium. Click here to start your free trial* and step up your investing. Yahoo Finance Premium members can read more analyst views by going to Research Reports and filtering by ticker.
