Wall Street's Thoughts On Amazon.com's (AMZN) Strong Q4

A number of Wall Street analysts are putting in their 2 cents on Amazon.com (Nasdaq: AMZN) today following strong Q4 numbers from the Internet retailer after the close. Amazon reported fourth-quarter earnings of 85 cents per share, 13 cents better than the analyst estimate of 72 cents per share, on profit of $384 million. In the same quarter last year the company made 52 cents per share, or profit of $225 million. Revenue for Amazon in the quarter was $9.52 billion, which beat the market consensus of $9.02 billion, and was up 42 percent from the year-ago quarter. The company's board also approved a $2 billion buyback in Amazon shares of common stock. The company forecasted sales in the current quarter at $6.45 billion to $7 billion, compared to the market estimate of $6.36 billion.

The results were so strong that one analyst did an about-fact on his rating, moving to a 'Strong Buy' with an aggressive price target.

• BWS Financial: "We are changing our rating on Amazon.com (AMZN- St. Buy Rating) after the Company posted fourth quarter results superior to consensus estimates. The revenue was stronger than the Street and us were expecting. The underlying reason for our change from a Sell Rating was due to operating margins. AMZN achieved 5 percent operating margin in the fourth quarter as it seems the Company has reached a revenue run rate where management can not find anything to spend cash on. The scale in operations that investors have been waiting for was present in the fourth quarter results and was indicated in the first quarter results. AMZN has continued to grow revenue at a high rate that would allow the stock to receive a high valuation. The Company will face a tough competitive environment second half of each year, but the Amazon.com brand continues to win. We are projecting AMZN to generate revenue in excess of $32.2 billion in 2010 and post operating profit of $1.6 billion, or 5 percent for the year. The cash flow generated from operations give us confidence of AMZN shares being able to move aggressively higher over the next 12 months. Along with our about-face on the rating we are raising our target to $200." Upgrade from a Sell to Strong Buy, $200 price target.
  
  
• Piper Jaffray: "We are raising our CY10 revenue growth to 30% y/y vs. the street at 26%. The Amazon story continued unabated in the December quarter with the company reporting $0.85 EPS vs. the street's $0.72 expectation. Revenue grew 42% y/ y to $9.5B (35% y/y excluding Zappos & FX benefit), above the street's $9.0B expectation. Based on an average beat, Amazon would report March GAAP EPS of $0.65 vs. our estimate of $0.61. We believe Amazon sold 1M Kindles in the quarter vs. our previous estimate of 750k. Kindle competition from Apple's iPad may weigh on Amazon's multiple, but is not expected to impact Amazon's business in 2010." Maintain Overweight, $172 price target.
  
  
• Kaufman Bros: "Momentum continues with revenues up approximately 34% Y/Y on an organic FX neutral basis vs. 29% in 3Q...PF operating income increased 66% Y/Y with PF operating margins of 6.3% vs. our 5.8% estimate...Strong domestic gross margins driven by continued scale efficiencies, third-party sales, and other revs. (i.e., web services)...We are modestly increasing our revenue and PF EPS estimates due to the strong revenues and improved margin outlook. For 1Q10, we move from $6.654B in revenues and $0.81 in PF EPS to $6.946B and $0.85. For 2010/ 2011 estimates, we move from $31.8B/$39.3B in revenue and $3.71/$4.82 in PF EPS to $32.2B/$39.3B and $3.85/$5.02, respectively." Reiterates Buy rating, raises price target from $155 to $160.
  
  
• Deutsche Bank: "Amazon certainly did not disappoint as FBA, Kindle and Prime powered 37% unit and 66% profit growth in 4Q. We believe Amazon is seeing increasing returns even with tough comps and stiff retail competition. We think 2010 likely represents a year of accelerated growth in revs and profits, driven by the core business and revs from the Kindle." Reiterate Buy rating, $raises price target from $125 to $155.
  
  
• Collins Stewart: "AMZN reported a Big Beat/Top-Line Raised & Bottom-Line Lowered Dec qtr. There was no segment that did not experience material growth acceleration. Some anecdotes in earnings release (i.e. "millions" of Kindle users) and disclosures around change in accounting for Kindle rev (i.e $500mm in deferred rev until Dec '09), suggest that we and Street are materially under-estimating Kindle unit shipment and Kindle related rev. We now estimate that Amazon has shipped a total of 2.25mm Kindle units and generated total hardware rev of $742mm (inc. $500mm in def rev) in the past 27 months vs. our prior estimates of 1.1mm and $370mm respectively. We also estimate that Amazon's Q1 guidance is benefiting by $62mm in rev/$6.2mm in OI due to the change in accounting for Kindle rev. Though there is unprecedented momentum in AMZN's core biz with improving fundamentals and Kindle's P&L impact is much bigger than previously thought due to the combination of rich valuation & increasing competitive risk for Kindle, we are choosing to stay on sideline." Reiterate Hold rating.
  
  
• Janney Montgomery Scott: "The iProfit Machine"... accelerating growth and stronger margins despite continued price cuts. Q1 revenue guidance was stronger than expected partly due to the change in Kindle accounting. We are raising our FY10 non-GAAP EPS to $3.50 from $3.25... believe increasing leverage over fixed costs is driving margin upside." Maintains Buy rating and $160 fair value target.
  
  
• Benchmark: "Amazon's stock trades at 47x our 2010E EPS and 22x our 2010E OIBDA compared with our ecommerce peer group averages at 23x 2010E EPS and 11x 2010E OIBDA. In our view, Amazon’s multiples reflect its superior, sustainable growth potential. Using a PEG ratio of 1.9x, or 57x our 2010E EPS of $2.65, our price target is $151 per share." Maintains Buy rating, $151 price target
  
  
• Broadpoint.AmTech: "This was yet another very strong quarter for AMZN. The top-line was driven by continued acceleration in U.S. Media and EGM, as well as International (International EGM growth on a y/y FX-neutral basis decelerated slightly). AMZN's growth story remains intact. Even more impressive was the gross margin expansion in the U.S. to 23.6% from 21.5%. The company highlighted four key U.S. gross margin drivers: 1. 3P sales growth; 2. Better pricing with suppliers; 3. Growing AWS revenue; 4. Better inventory management" Maintains Neutral rating, raises price target from $140 to $145.
  
  
• FBR Capital: "EGM's 60% growth was the fastest the company has posted in a single quarter since 2004, driven in part by the international rollout of Kindle. With the stock at 33x FY10 PF EPS and likely to open higher, compared with the group at 23x, AMZN is clearly trading at a substantial premium to the group. However, given the premium growth rate, the significant competitive advantages, strong cash flow generation, and the additional growth and margin expansion opportunities from Kindle, International, and Web Services, we find it difficult to argue that a substantial premium is not justified." Maintains Outperform rating, $160 price target.
  
  
• Susquehanna: "Investors are likely to appreciate the upside to AMZN's numbers for 4Q09, the solid increase in guidance and estimate revisions of 10-15%. Enthusiasm could be moderated somewhat as some of the increase in our outlook is due to the acquisition of Zappos and a change in Kindle accounting. We remain Positive and believe the good outweighs the bad, especially relative to the longer term story." Maintains Positive rating, $150 price target.
  
  
• Goldman Sachs: "A mix shift to third party sales, better vendor pricing, and more cloud computing services revenue drove operating margins up 90 basis points yoy, to 6.3%. The company guided 3% above us for 1Q revenue at the mid-point, and guided slightly above us for 1Q operating income at the mid-point. It has beaten the top end of its operating income guidance in the last four quarters, so we do not read anything negative into an implied operating margin just below our forecast, especially given the higher dollar earnings guidance." Maintains Buy rating, raises 6-month price target from $146 to $160.
  
  
• UBS: "AMZN remains our top eCommerce pick as its operational metrics (users, units/user, ASP) continue to move in the right direction. In addition, we believe competitive fears from the iPad may be over blown... Media revenue accelerated to 29% Y/Y (vs. +17% Y/Y in Q3), while EGM continues to outperform (+60% Y/Y in Q4; 44% Y/Y in Q3). High margin Other revenue also accelerated (+32% Y/Y v.s. 25% Y/Y in Q3) boosting gross margin." Reiterate Buy rating, raises price target from $160 to $175.

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