In a report published Friday, analysts at Morgan Stanley reiterate their Overweight rating on Amazon.com, Inc. (NASDAQ: AMZN). The company has, however, been removed from Morgan Stanley's Best Ideas list due to the recent stock outperformance. The price target has been maintained at $450.
The analysts are bullish on the company's core business, given Amazon's expanding gross margins, accelerating top-line and improving profitability.
Results reported for 1Q show acceleration across all four of the company's businesses, with year on year growth for the second time in 36 quarters. "1Q results reaffirmed our bullish view that AMZN is entering a phase of increasing profitability that will deliver even as it continues to take a larger share of the global e-commerce pie," the analysts said.
Amazon also reported the highest incremental margins in the past five years. Morgan Stanley believes that the company can invest its gross margin dollars in Prime, devices, video content, fulfillment centers, more categories, improved selection and international expansion, while continuing to post profitability upside.
According to Morgan Stanley, "[N]ew AWS disclosure shines a light on a $34bn EV business already operating at 50% EBITDA margins." The company also reported revenue of $5 billion for the AWS business.
"AWS disclosure and the resultant greater visibility on the profitability of Amazon's core North America retail business completes the near-term event path that was the rationale for adding AMZN to the Best Ideas," the analysts added.
Latest Ratings for AMZN
| Apr 2015 | Raymond James | Upgrades | Market Perform | Outperform |
| Apr 2015 | Janney Capital | Upgrades | Neutral | Buy |
| Apr 2015 | JP Morgan | Upgrades | Neutral | Overweight |
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