by Christopher Freeburn | January 31, 2014 11:06 am
While Amazon (AMZN) stock fell more than 8% in Friday morning trading after the company released disappointing quarterly results, at least one investment firm thinks the stock has considerable upside.
Stifel noted that AMZN fourth-quarter results were “not nearly as weak as some investors might think.” Stifel analysts pointed out that AMZN revenue jumped 22% year-over-year and that “gross margins greatly exceeded expectations.” Given this, Stifel reiterated its “Buy” rating for AMZN stock and raised its price target from $400 a share to $440. That would represent a gain of about 20% above the current price of AMZN shares.
AMZN margins didn’t contract as much as feared despite a surge in its loss-producing Kindle tablet sales, Stifel argues. Losses on Kindle unit sales are later redeemed by greater media purchases through the tablets, which compete with Apple’s (AAPL) iPad and Samsung tablets. Amazon’s international media sales haven’t yet matched U.S. media sales, which continues to hurt results, according to Stifel.
Responding to pressure on its margins, AMZN is mulling an increase in the annual membership fee for its Amazon Prime service, a move which would firm up margins in the face of rising shipping costs.
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