Is it time to load up on Amazon (AMZN) shares? If the company’s latest actions are to follow previous similar events, then the answer could be yes. At least that is the opinion of Morgan Stanley’s Brian Nowak.
In Amazon’s recently filed 10K, the company disclosed it had forked out $1.3 billion on repurchasing 500,000 shares between January 1st and February 2nd.
This is something of a rare event. Amazon’s last stock buys were made 10 years ago (1Q12). In fact, during its entire history, the company has only repurchased shares in 5 quarters – 1Q12, 4Q11, 4Q08, 1Q07, and 3Q06.
And it appears that those purchases were very well-timed. On average, if an investor had followed in the company’s footsteps, by Nowak’s calculations, they would have seen an average return of 42% over a 6 month return period.
Likewise, buying and holding the stock for 12 months would have yielded returns of 100%. Keeping it for longer still – 24 months – would have resulted in returns of 135%.
Although Nowak considers the move “more symbolic than material,” it is nevertheless a “positive signal.” Not that the analyst thinks the bull case rests on such actions. There are many “fundamental reasons” why Nowak keeps a bullish slant here and over the near-term, he does not expect the company will “materially shrink its float.”
“That said,” the analyst concluded, “As big tech (GOOGL/FB/AAPL/MSFT) becomes more shareholder friendly (buybacks, disclosure, etc) we are happy to see AMZN participate.”
This pertains not only to the buybacks but also to the disclosure on ad revenue– a first – and the “better color” on capex made in its latest quarterly report and earnings call.
All in all, Nowak rates AMZN shares an Overweight (i.e. Buy) along with $4,200 price target. Should his thesis prove correct, investors will be sitting on gains of 36% a year from now. (To watch Nowak’s track record, click here)
What do the rest of Wall Street’s analyst corps think? Just one thing apparently. All 31 other recent reviews are positive too, providing the stock with a Strong Buy consensus rating. The Street’s average target of $4,189 and change is practically the same as Nowak’s. (See Amazon stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
