Citi’s Mark Mahaney out with another strong contrarian call: Buy Amazon (AMZN). The more conventional play would be to start shoveling Amazon out the door, now that Christmas is over and the “holiday ecommerce!” catalyst has driven it back into the high $90s, but Mahaney cites several attributes that get him all hot and bothered about the stock:
- Expect margin expansion in ’08 thanks to sandbagged guidance (translation: Street wrong in belief that margins have peaked).
- More market share gains (no news there, though one of the victims is now Meg Whitman’s sputtering eBay)
- Digital product innovations gaining traction (we agree! Amazon’s music download store appears to be the first real potential competitor to Apple’s iTunes).
- Huge international business (Like other analysts, including yours truly, Mahaney forsees imminent US economic collapse. Despite Amazon’s big international business, we have trouble seeing how the stock will survive a US slowdown–especially given that the US plague might spread–but on a relative basis, anyway, Amazon’s international exposure should help.
- Street estimates going up. Other analysts, Mahaney believes, were fooled by that absurdly low margin guidance and will soon be jacking their numbers.
Mahaney’s $119 target is 50X his 2009 EPS estimate of $2.38, verus a current 2008E P/E of 52X.
Disclosure: As a long-term Amazon shareholder, Henry Blodget is not displeased by this call.
Business Insider Emails & Alerts
Site highlights each day to your inbox.