Editor's Note: This article was originally published on Real Money at 2:20 p.m. on June 23.
Two Growth Seeker holdings were the subject of separate analyst notes late Wednesday. B/E Aerospace (BEAV) was initiated with an equal weight rating from analysts at Morgan Stanley, while analysts at Maxim reiterated their buy rating on Amazon(AMZN) - Get Report .
B/E Aerospace, a Wellington, Fla.-based manufacturer of cabin interior products for business and commercial aircraft, is facing sector headwinds, according to analyst Rajeev Lalwani. Falling airline profits, declining traffic and uncertain financing are all weighing on the sector's bottom line; however, those downtrends are being offset by some promising signals.
"All in all, the overhang is not fully warranted, though we note that downside risks are present and should be reflected in valuation to an extent," Lalwani said, leading the firm to its in-line rating and $52 price target. That target represents a potential 6.5% upside from the stock's previous close of $48.84.
"In our view, it is well-positioned on both the OEM (original equipment manufacturers) and after-market fronts since the former is supported by buyer-furnished equipment (BFE) contracts through 2017 that mitigate exposure to near to medium production rate changes," the note said.
However, that optimism is tempered by the fact that the stock has already been outperforming its peers, giving it less upside going forward. "Share-price performance to-date has been strong vs. peers, which we attribute to growing trust in the outlook as we head into 2017, thus tempering our enthusiasm for valuation given upside of about 6%," Lalwani wrote.
Growth Seeker portfolio managers Chris Versace and Lenore Hawkins have been covering B/E for months and preaching the same sermon as Morgan Stanley's note.
"We'd point to the faster-growing airline traffic in the emerging economies that is spurring new aircraft orders as well as domestic airlines beefing up their cabins with more creature comforts to attract passengers," Hawkins and Versace said in an email exchange. "The opening of new markets, like Cuba and Iran (see BA's deal), also helps give some additional legs to the current aerospace cycle."
Despite the optimism, the pair believe B/E has limited upside, giving the company a sub-prime rating of 2.
Separately, analysts at JMP Securities reiterated their market perform rating and $775 price target on Amazon following the company's Public Sector Summit on Monday. The firm is bullish on the future of the company's Amazon Web Services cloud segment. JMP noted that more than 7,500 AWS clients and partners attended the event.
"While the competitive environment continues to grow, we believe AWS is constantly differentiating itself through product innovation as we feel AWS users value new products, service and support more than price," the analyst note said.
The firm expects Amazon's cloud computing revenue to reach $12.1 billion for 54% year-over-year growth, concluding, "We continue to believe the risk/reward on Amazon shares remains favorable given improved profitability across its retail business, overall revenue growth, and strong execution at AWS, despite shares being up 8.3% since 1Q16 earnings (vs. 1.5% for the S&P)."
While Amazon's cloud services success is definitely helping drive growth -- AWS controls about 30% of the cloud Software as a Service market -- Hawkins and Versace are more concerned with its position at the forefront of the Internet of Things interconnectivity movement.
"As far as AMZN goes, we continue to like the company and the shares as it sits in the pole position of the Connected Society, and we certainly like the rate of growth at the higher-margin AWS business," Hawkins and Versace said. As a result the pair -- who co-authored the book Cocktail Investing -- have an $880 price target on Amazon, which is about 1x 2017 expected earnings.
While both Growth Seeker holdings are in a good position, Amazon has a lot more room to grow than B/E does thanks to sector headwinds.