Amazon's 'Secret Sauce' Earns It A New Buy Rating From Wall Street

Amazon.com, Inc. AMZN's stock has plenty of upside remaining because of its "secret sauce," Loop Capital Markets' Anthony Chukumba commented in an initiation note. The analyst initiates coverage of Amazon's stock with a Buy rating and $1,200 price target.

Amazon has years of strong growth ahead because of its "secret sauce" — that is its Prime membership, Chukumba argued. The Prime membership program not only offers unlimited speedy delivery but the "myriad" of additional Prime benefits makes the program increasingly sticky for consumers. In addition, the strong growth seen in Prime membership allows Amazon to "no longer solely rely on being the low-price leader."

Aside from Prime, Amazon boasts another business segment with a similar growth profile, Chukumba continued. Amazon's cloud business, called Amazon Web Services, stands to benefit from many years ahead of profit growth as it continues to win new companies looking to outsource their computing and storage needs. Even though Amazon's AWS unit is a "first mover" in the space versus other cloud providers it continues to innovate and offer superior functionality.

The case for owning Amazon's stock can also be attributed to the company's culture and management team, Chukumba also argued. At the forefront is its CEO and founder Jeff Bezos who leads with a "powerful — yet underestimated — competitive advantage."

Finally, Amazon's free cash flow generation continues to show signs of improvements from the past few years which is especially important given Amazon's reputation of overseeing "seemingly never ending investments."

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