Why Did Citigroup Inc (C) Upgrade Amazon.com, Inc. (AMZN) To ‘Buy’ Rating?

Amazon.com, Inc. (NASDAQ:AMZN) has received an upgrade from Citi. Citi has upgraded Amazon.com, Inc. (NASDAQ:AMZN) stock from ‘Neutral’ to ‘Buy’ rating earlier today and had set a price target of $354 for the stock. Citi Analyst, Mark May talked on CNBC about the reasons behind upgrade and why they think that the company is set to grow.

May has pointed out three main reasons behind the upgrade, which are top-line growth, valuation support and more stable margins. May said that at $300 the company is trading in line with traditional retail companies like Wal-Mart Stores, Inc. (NYSE:WMT), Target Corporation (NYSE:TGT) and Coscto Wholesale Corporation (NASDAQ:COST), despite the fact that Amazon.com, Inc. (NASDAQ:AMZN) is growing about four times faster than these companies and despite the fact that Amazon has proven, it is capable of producing comparable if not higher margins with those companies in the past.

So he thinks that this is the good time to look at Amazon.com, Inc. (NASDAQ:AMZN) stock and hence the valuation support came into picture. May has said in his report that margins can reverse the recent trend for Amazon.com, Inc. (NASDAQ:AMZN).

“We had downgraded Amazon back in July last year when the stock was around $360. At the time what was not known and not priced in was the heavy investment cycle that the company was going through. Investing heavily in their AWS, investing heavily in hardware devices, etc. We look out into this year, we don’t see the investment cycle in that radar, what we saw in 2014. We think that we will see more stable and likely increase in margins,” May said.

May pointed out that the reason behind downgrade by Citi on Amazon.com, Inc. (NASDAQ:AMZN) stock in July 2014 was mainly due to the heavy investment cycle which the company was going through at that time. But he thinks that there is not such investment cycle expected in 2015 and hence we can expect some stable and increasing margins for Amazon.com, Inc. (NASDAQ:AMZN) in 2015.

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