SunTrust's Bob Peck was impressed by Amazon.com, Inc. (NASDAQ: AMZN)'s earnings report Thursday, but issued a caution on its price. The stock is trading sharply higher in Friday's premarket, which indicates it may open 13 percent higher to $440. Peck increased SunTrust's 2015 price target to $415, up from $370.
From the earnings report, Peck highlighted Amazon's record gross margins of 32 percent, a 250 basis points expansion that was driven by third-party sellers. The breakout of Amazon Web Services highlighted its profitability, with AWS margins steady at 16.9 percent.
On the negative front, Peck noted that international margins declined 1 percent as Amazon continues to invest in new, large markets. Peck warned that, despite these investments, these markets "may take years to develop."
Further, Peck said that the analysts "anticipate fierce competition will persist in the e-commerce and cloud markets driving increasing capital needs (logistics, content, storage/compute)." Against that backdrop, SunTrust maintained its Neutral rating and increased its price target.
SunTrust said that the company has "elevated valuation vs. peers on a FCF basis," leading Peck to conclude that it is "too high" at more than 70x 2015 expectations and more than 40x 2016 expectations. Comparatively, Google Inc (NASDAQ: GOOG) is at 19x and Facebook Inc (NASDAQ: FB) is at 30x. SunTrust rates both Google and Facebook as Buy.
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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