Janney Boosts Amazon Estimates On 'Productivity Gains'

In a report published Friday, Janney Capital analyst Shawn Milne maintained a Buy rating on Amazon.com, Inc. (NASDAQ: AMZN). The price target was raised to $515. The company is expected to see additional productivity gains and potential margin upside in North America, going forward.

"One of the key takeaways from Q1 is the continued growth/acceleration in AMZN's Marketplace business with paid unit growth of 20 percent and 3P units accounting for 44 percent of total units (new high water mark)," Milne said.

Related Link: Amazon's New Move To 'Up The Ante' Threatens Big-Box Retailers, Wedbush Says

The analyst expects 3P GMV to reach $100 billion, with total GMV at $180 billion for FY15. Also, gross margin expansion is expected to continue across the company's businesses and not just in AWS, driven primarily by rapid growth at AWS and the 3P shift leading to expansion in Retail margins. The gross margin estimates for FY15 and FY16 have been raised to 31.9 percent and 33 percent, respectively.

In addition, both fulfillment and shipping costs have been declining, driven by productivity improvements. "While still early, we believe Kiva is driving productivity gains in Fulfillment costs alongside capacity ramp," Milne explained, adding that "the significant push to get FCs closer to the customer in N.A. is driving down Shipping Costs."