One analyst is calling Amazon (AMZN -0.29%) stock his best idea, citing the company's prospects for strong revenue growth and further margin expansion. The bullish note from the analyst comes after shares have fallen about 18% since Oct. 1, giving them a more attractive valuation. The stock closed Dec. 11 at $1,643.

To see whether Cowen analyst John Blackledge is onto something, here's a closer look at the reasoning behind his bullish call.

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The path to $2,250

"Amazon has several drivers that should yield robust global revenue growth with rising margins the next several years," said Blackledge in a note on Tuesday (via CNBC), "namely further B2C e-commerce market share gains in large retail verticals, emerging e-commerce verticals like B2B, and significant opportunity in existing and newer markets..."

Blackledge also called out Amazon Web Services (AWS) and advertising in his note. AWS revenue can compound at an average rate of 31% between 2019 and 2024, the analyst predicted. Meanwhile, "Amazon's advertising, while still nascent, will drive both revenue growth and margin opportunity," he added.

These catalysts will lead to 17% annualized consolidated revenue growth over the next five years, the analyst predicted.

With these drivers in mind, Blackledge has a $2,250 12-month price target on the stock.

It's true that all of these areas are seeing significant momentum.


Amazon has seen strong growth in e-commerce sales recently, fueled by online stores sales, third-party seller services, and subscription services.

Amazon's online stores revenue rose 10% year over year in Q3 to $29 billion. While this is a significant deceleration from 22% growth in the third quarter of 2017, Amazon's smaller e-commerce businesses -- third-party seller services and subscription services -- saw revenue rise an impressive 31% and 52%, respectively, year over year in Q3. Revenue from these segments totaled about $14.1 billion during the quarter, making them important catalysts to Amazon's overall business.


Amazon's momentum internationally is particularly strong. International revenue in Q3 was up 29% year over year, a significant acceleration from 13% in the year-ago quarter. Accounting for about a third of Amazon's consolidated revenue, the company's international expansion is key to the company's growth story.


Amazon's cloud computing business, AWS, is arguably the company's most important catalyst. Though the segment accounts for just 11% of total revenue, it represented about 60% of the company's operating income over the trailing nine months. In addition, the segment's revenue and operating income are both growing at staggering rates. AWS revenue and operating income in Q3 were up 46% and 77% year over year, respectively. Over the trailing nine months, AWS revenue and operating income climbed 48% and 72%, respectively.


Though Amazon's advertising business is still small enough to be buried in the company's "other" segment, it shouldn't be overlooked. Indeed, advertising could be Amazon's fastest-growing business -- other revenue in Q3 rose 122% year over year, and the company has said that advertising accounts for the bulk of the segment. Further, management said in its second-quarter earnings call that advertising's growth is beginning to have a positive impact on the company's overall gross profit margin.

While there's no guarantee Amazon will hit $2,250 within the next year, Blackledge has certainly highlighted some areas where the company is seeing impressive momentum.