Amazon.com (AMZN - Get Report) remains the "best long-term growth story available to investors today," MKM Partners analyst Rob Sanderson argued on Tuesday, while hiking his price target on the e-commerce giant's stock to $1,275 per share, up from $1,095.

While accounting for higher spending forecasts and lower operating margins, Sanderson boosted his revenue estimates for Amazon in 2017 and 2018. But, his bullish call is predicated on the company's earnings potential, according to Barron's.  

"Both its primary end markets, retail and computing are being redefined by technology advancement, the company is a dominant disruptor in both segments and each opportunity is massive with only single-digit penetration," Sanderson said. But, he does not expect Amazon to achieve high profitability in the near-term. He believes the company should "be managed for profits" until growth opportunities appear limited or too risky.  

"Until then, we are valuing the business on earning potential. We are not changing our valuation methodology, but applying a shorter discount period to higher estimates," he explained.

"We assume GAAP operating margin of 7% for North America commerce, 5% for International commerce and 33% for AWS, applied to our 2022 forecast," he noted. "We apply a 30x P/E to commerce and 35x to AWS earnings to our estimates for 2022, which we think the stock will trade at by 2021."

This method, he says, implies a $2,010 stock in just three and a half years, but he applied a discount rate of 20% per year, equating to his $1,275 price target by mid-2018.

Amazon stock traded down 0.53% to $984.62 midday Wednesday.

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