Nomura Sees 25% Upside In Amazon: 'Cloud-y With A Chance Of $850'

• Shares of Amazon.com, Inc (NASDAQ: AMZN) have been rising steadily in 2015 and are up 118 percent year-to-date.
• Nomura’s Robert Drbul maintained a Buy rating on the company, while raising the price target from $700 to $850.
• Amazon is poised to benefit from the growing acceptance of cloud infrastructure and improved data center spending in 2016 and beyond, Drbul stated.

Amazon’s shares have largely been driven by the performance of the AWS. Analyst Robert Drbul expects the momentum in the company’s shares to continue, driven by AWS, geographical expansion, unit growth and continued innovation.

Nomura’s TMT outlook noted that 2015 marked an important inflection in the acceptance of public cloud infrastructure with companies increasingly realizing the benefits available by leveraging the cloud.

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Drbul believes that data center spending is set to reaccelerate in 2016 for both the enterprise and consumer segments and would continue to grow after that.

He added, “In our view, given these themes coupled with the segment’s rapid pace of innovation, its expanding top line/margin, and its marquee customer base, we believe improved profitability appears sustainable and that dominance in the cloud computing market will continue.”

The analyst expects Amazon’s North American segment to increasingly dominate the growing retail ecommerce segment. The company’s NA sales are estimated to rise from 19 percent of the US ecommerce market to around 24 percent.

The EPS estimates for FY16 and FY17 have been raised from $5.00 to $5.50 and from $7.50 to $10.00, respectively, to reflect margin expansion at AWS.