Analyst: Amazon stock to hit $1,275 per share in 2018

Amazon is the "best long-term growth story available to investors today." But don't expect the company to generate meaningful profits anytime soon.



That's according to MKM Partners managing director Rob Sanderson who, on Tuesday, raised his price target on the online giant's stock to $1,275 per share, up from $1,095.



"We think investors will continue to be supportive of aggressive spending because: (1) retail and computing end-markets are massive and still appear untapped, (2) Amazon has dominant position as a disruptor, (3) the reallocation of value in these ecosystems to Amazon’s favor is tangible to investors and (4) investor confidence in management execution is as good as we have ever seen," wrote Sanderson.



In his note, Sanderson said that subscription revenue growth, a proxy for Prime adoption, grew by over 50% again in Amazon's second quarter. Also, usage of core Amazon Web Services (AWS) is accelerating.



Major investment areas for Amazon are expansion of its fulfillment network, AWS capacity and driving Prime memberships, including video.



Sanderson advised that Amazon has never been valued on near-term profit and likely won’t be until investors can see a limit on growth opportunities.



"Until then, we think revenue growth and share gain will matter more than profitability," he stated. "We do not expect Amazon will generate meaningful profits anytime soon. The company should be managed for profits until growth opportunities become more limited or more risky, in our view."