Amazon.com Inc (NASDAQ: AMZN) stock is up 6.0% after the tech titan announced a stock split and a $10 billion share repurchase programme last night.
Why Mahaney sees Amazon stock as a buy right now
According to Mark Mahaney, the buyback announcement is a strong signal to hop onto the stock at current valuation. On CNBC’s “TechCheck”, the head of internet research at Evercore ISI said:
The share buyback is a signal. Amazon always has a price at which they’ll buy their stock where they view it as screamingly cheap. They didn’t do it in the last decade. That says something about how they thought about their value. And that says something today as well. It’s a great opportunity to buy.
Much like its peer Apple Inc, Mahaney expects Amazon to significantly outperform following the stock split.
Mahaney expects Amazon margins to expand this year
Other reasons that he’s bullish on the stock include margins, which Mahaney says will go up this year as Amazon is coming out of a major investment cycle. He added:
Amazon generates more ad revenue than YouTube and it’s growing faster than YouTube. And they’re just starting to tap into display brand advertising with this NFL content they’ll have in the fall. So, growth rates will remain premium at Amazon for quite some time and it’s got wonderful implication for margins.
Amazon disclosed its ad revenue for the first time in its earnings report for the fiscal Q4 last month.
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