NEW YORK (TheStreet) -- Apple (AAPL - Get Report) is set to have a very, merry Christmas, while Amazon (AMZN - Get Report) has its drones (no kidding, it actually has drones!), but which wins out in TheStreet's ratings battle?
Buy Amazon? Yes and No
Jim Cramer fielded a question from an investor on Monday morning, asking whether he would buy Amazon and whether it was worth $400. Cramer's answer? Yes and no.
Writing on TheStreet's premium site Real Money, Cramer said, "You can buy Amazon, the stock, because you recognize that this company will stop at nothing to bring you the best goods at the cheapest prices in a way that you don't have to do a thing about."
But is it worth $400, merely 2% higher than what it is currently trading at?"By any traditional metric, the answer to this question is: absolutely not," wrote Cramer. But Amazon isn't your traditional company. As Cramer puts it, it's a high-momentum play on a company that is expanding rapidly, and cares little as to whether it's raking in the dough or hemorrhaging money. In short, it's worth what people will pay for it. After Goldman Sachs upped its price target to $450 from $400 on Monday, the stock is sure to be in demand. As TheStreet Ratings team puts it, Amazon is one to hold onto for the time being. The team reiterated its "hold" rating with a score of C. "We rate Amazon.com Inc (AMZN) a HOLD. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its robust revenue growth, good cash flow from operations and solid stock price performance. However, as a counter to these strengths, we find that the company's profit margins have been poor overall." Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth came in higher than the industry average of 7.6%. Since the same quarter one year prior, revenues rose by 23.8%. Growth in the company's revenue appears to have helped boost the earnings per share.
- Net operating cash flow has increased to $1,389 million or 47.29% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 36.42%.
- Powered by its strong earnings growth of 85% and other important driving factors, this stock has surged by 58.87% over the past year, outperforming the rise in the S&P 500 Index during the same period. Setting our sights on the months ahead, however, we feel that the stock's sharp appreciation over the last year has driven it to a price level which is now relatively expensive compared to the rest of its industry. The implication is that its reduced upside potential is not good enough to warrant further investment at this time.
- The company, on the basis of net income growth from the same quarter one year ago, has significantly underperformed compared to the Internet & Catalog Retail industry average, but is greater than that of the S&P 500. The net income increased by 85% when compared to the same quarter one year prior, rising from -$274 million to -$41 million.
- The gross profit margin for Amazon.com Inc is currently lower than what is desirable, coming in at 32.53%. Regardless of AMZN's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of -0.23% trails the industry average.
- You can view the full analysis from the report here: AMZN Ratings Report