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‘Massive buying opportunity’: Canaccord says Amazon at most compelling valuation in years

Mark Oldenburg packs a pair of pillows into a box for shipment to a customer at Amazon.com's fulfillment centre in DuPont, Washington.

Shares of Amazon.com Inc. have taken a 180- degree turn to start 2016 after finishing this past year as one of the best-performing stocks in the S&P 500. With shares now down more than 20 percent since January 1, one Wall Street analyst is telling clients this is really a massive buying opportunity.

“Amazon’s stock is down by about 25 per cent, and also the valuation is really as reasonable because it has been in years,” said Michael Graham of Canaccord Genuity. “We feel Amazon’s stock is not likely to really retreat into ‘value’ territory so long as top-line momentum is strong, and we expect this to persist for the near future.” Graham joins the majority of Wall Street analysts with “Buy” ratings around the stock, in which the average price target is US$750, the same as his new price target, that was previously US$600.

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Amazon was one of the main reasons the S&P 500 didn’t finish the year in negative territory, adding nearly 16 suggests the index within the year, using its own 117 per cent rise. It became referred to as one of the “FANG” stocks which were basically saving the marketplace and was likely the most influential player in the group. Canaccord were built with a hold rating around the firm during its run-up, and it is essentially apologizing to investors by not recommending the stock earlier.

“We regrettably missed last year’s big move in Amazon’s stock,” Graham said. “While we were positive about top-line growth prospects, i was concerned that margins would expand more slowly than consensus expected. This view was marginally vindicated by Amazon’s fourth quarter earnings report, wherein the organization guided for a slower margin ramp. This, combined with general market weakness, has caused the stock to drop about 25 per cent since the start of the year. We are therefore taking this opportunity to upgrade the stock and re-join the majority which we feel is correct in this instance.”

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