Amazon Prime Day Was An Absolute Blowout; Where Does Stock Go From Here?

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On Tuesday ‘Shark Tank’s Kevin O’Leary was a guest on CNBC’s “Debate It” segment to make his case against shares of Amazon.com, Inc. (AMZN). During the interview O’Leary recognized the fact that Amazon is a great company, especially highlighting the e-commerce giant’s AWS segment. Still, he stressed that it may be wrong to assume “everything goes right forever.” According to O’Shares Investments Chairman, if we get a correction in the overall market, then high P/E stocks like AMZN with a forward P/E ratio of 75x will be first to “get killed.”

“[E]ven if I’m going to be a contrarian on Amazon stock, I still wouldn’t buy it”, O’Leary said.

TIAA Global Asset Management’s Stephanie Link was making the bull case for the Amazon stock. She argued that although there is some uncertainty in the near-term, Amazon is a company that is “changing the way people are doing their commerce”. Link said she sees the Seattle-based company as a “secular growth story”.

Meanwhile, Amazon announced before Wednesday’s open that Prime Day was a huge success with orders surpassing last year’s event by more than 60 percent worldwide and more than 50 percent in the U.S. While the e-commerce giant didn’t release sales figures, it said that Prime Day 2016 was the biggest sales day ever for its devices including the Fire TV, Fire tablet, Kindle e-reader, and Alexa-enabled devices. Some reports estimate Amazon’s this year’s event could reach $1 billion in single-day sales, outdoing all previous Black Friday and Cyber Monday sales.

As with the first annual Prime Day sales, the company released a handful of big sales numbers, saying its customers bought more than 90,000 TVs and hundreds of thousands of Kindle e-readers worldwide. In the U.S., the online retailer sold over 200,000 headphones, 23,000 Roomba vacuum cleaners, 14,000 Lenovo laptops, and over 215,000 Instant Pot 7-in-1 Multi-Functional Pressure Cookers.

“We want to thank our tens of millions of members around the world for making this the biggest day in the history of Amazon”, Greg Greeley, vice president of Amazon Prime worldwide, said in a statement, adding “We hope you had as much fun as we did. After yesterday’s results, we’ll definitely be doing this again.”

More than a million customers used the Amazon app for the first time on Prime Day to shop and to watch-a-deal. In the U.S., Amazon devices were up over 3 times compared to Prime Day last year, the company noted.

Wall Street analysts were also impressed with the results. Piper Jaffray’s Gene Munster said to investors in a research note that Amazon Prime brand “remains strong and user engagement continues to improve.” He reiterates an ‘Overweight’ rating on the name with an $800 12-month base case estimate.

“Prime Day is now solidified as an annual shopping holiday,” Munster wrote.

Axiom Capital’s Victor Anthony reiterated a ‘Buy’ rating and $853 AMZN price target.

Meanwhile, Baird analyst Colin Sebastian says he sees Prime Day as a success, helping to boost traffic and visibility for Amazon. Sebastian maintains an ‘Outperform’ rating and $800 price target on the name.

Alongside Baird, Benchmark’s Daniel Kurnos reiterates a ‘Buy’ rating, raising his AMZN price target from $750 to $915, noting the firm suspects Prime Day may have added nearly 300 basis point of revenue growth and over 6 million new Prime members worldwide. The analyst noted however, that while they are concerned that profitability in the quarter may come in below consensus, Amazon’s new monthly Prime option should help with consumer stickiness, leading to further market share gains.

TheStreet’s Jim Cramer said although Amazon’s stock is expensive, it’s not overvalued.

“What I want to urge people to do is recognize that Amazon is a secular grower, taking share away from a lot of companies now moving away from even just apparel and books and devices, now moving to a lot of other areas.”

Amazon Stock Valuation Metrics

Shares of Amazon closed down 0.55 percent to $744.12 on Wednesday, near an all-time high.

Amazon.com Inc. shares are priced at 307x this year’s forecasted earnings. The company’s current year and next year EPS growth estimates stand at more than 331 percent and 83 percent, respectively. AMZN has a trailing-12 price-to-sales ratio of 3.20. EPS for the same period registers at $2.43.

Amazon shares have advanced 4.22% in the last 4 weeks and 24.05% in the past three months. Over the past 5 trading sessions the stock has gained 2.76%. The $351.5 billion market cap company has a median Street price target of $800 with a high target of $1,000.00.

Amazon.com Inc. is up 64.24% year-over-year, compared with a 2.50 percent gain in the S&P 500.

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