Why RiverPark Is Bullish On Amazon.com (NASDAQ: AMZN)

The RiverPark Large Growth Fund is bullish on Amazon.com, Inc. (NASDAQ: AMZN). The fund, which recently released its Q2’18 Investor Letter, says that the online retailing giant continues to post impressive results in its core business segments and innovate in new markets such as video content, digital marketing, last mile delivery, the Echo/Alexa platform and, the $3-trillion healthcare market. The fund believes that Amazon has exceptional potential for sales and profit growth. Let’s take a look at the fund’s comments about Amazon.

AMZN shares advanced 17% for the quarter after reporting extremely strong first quarter results. For the quarter, sales increased an impressive 43% to $51 billion, an acceleration from the fourth quarter’s 38% year-over-year growth, while operating income increased 92% year-over-year (also an acceleration from the fourth quarter) and net income more than doubled to $1.9 billion. The company’s results were impressive across both its consumer franchise and its web services divisions. In its North America retail division, the company reported sales of $31 billion (for year-over-year growth of 46%) and 93% operating income growth. International retail also posted accelerating results with year-over-year revenue growth of 34% to $15 billion for the quarter. The company’s Amazon Web Services division was again a standout as it experienced another acceleration of growth to 49% year-over-year with operating margins of 25.7% (an increase of 140 basis points year-over-year). While Amazon continues to invest heavily to drive its market leading positions in each of its businesses and in all geographic regions, the company also continues to grow operating income faster than its strong sales growth. Additionally, management also provided better-than-expected second quarter guidance of 34%- 42% revenue growth and 75%-100% operating income growth.

In addition to posting impressive results in its core business segments, AMZN continues to innovate in new markets such as video content, digital marketing, last mile delivery, private label, the Echo/Alexa platform and, more recently, the $3 trillion healthcare market (via its partnership with J.P. Morgan and Berkshire Hathaway to lower the cost of covering employees and its $1 billion acquisition of online pharmacy PillPack). We believe that the sales and profit growth potential for the company remains exceptional and will lead to dramatic increases in excess free cash flow over the longer term.

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Shares of Amazon.com, Inc. (NASDAQ: AMZN) are up 62.12% since the beginning of this year. Over the past three months, the share price has jumped more 19%. Whereas, the stock has moved up more than 103 % over the past 12 months. AMZN has a consensus average target price of $2,127 and a consensus average recommendation of BUY, according to analysts polled by FactSet. On Monday, the stock was closed at $1,927.68.

Meanwhile, Amazon is a very popular stock among hedge funds tracked by Insider Monkey. As of the end of the second quarter of 2018, there were 137 funds in our database holding shares of the online retailer, including Taconic Capital, Antipodean Advisors, and Think Investments.

Disclosure: none