Why This Amazon Analyst Says Shares Are Worth As Much As $5K

Shares of e-commerce giant Amazon.com, Inc. AMZN are worth nearly twice as much as today's valuation, according to a Needham analyst.

The Amazon Analyst: Laura Martin maintained a Buy rating on Amazon with a $3,200 price target. 

The Amazon Thesis: Amazon is much more than an e-commerce company, Martin said in a Thursday note. (See her track record here.) 

The company's Services business — with an operating margin of 19% compared to 3% for the e-commerce business — represents about 75% of its enterprise value, the analyst said. 

Amazon Prime Video has a multifaceted role in Amazon's bundle, as it broadens the company's brand relationship within each home, elongates time spent inside the Amazon ecosystem and drives pricing power upside for Prime, she said. 

Prime Video also offers a competitive advantage, as the shipping advantage tied to the service prompts users to cancel Netflix Inc NFLX or other unbundled streaming services, Martin said. 

Addressing reports that Amazon will add linear TV channels, the analyst said she sees three potential value-creating paths.

Amazon may replace its $130-million, two-year deal with the NFL for 22 Thursday night NFL games with any broadcaster with many sports, plus news, TV series and movies, Martin said.

The company could add ad-driven streaming content with the potential to add video ad units to its $18-billion annual display and search ad business, the analyst said.

Amazon is likely to create a skinny bundle of 50-70 linear TV channels for $50-$60 per month to add a new revenue stream, she said. 

Needham sees Amazon possessing several hidden value multipliers: a total addressable market expansion multiplier, a Services company multiplier, a $500-billion media asset value multiplier and ecosystem value multiplier.

All these render the valuation of Amazon at $4,500-$5,000 per share, Martin said. 

AMZN Price Action: Amazon shares were up 0.2% at $2,739.79 at the time of publication Thursday.

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Photo courtesy of Amazon.