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Investors and analysts have been framing the Amazon  (AMZN) – Get Report sum-of-the-parts valuation wrong, according to a Pivotal Research analyst, who raised his price target for the internet retail giant to $4,500 from $3,925.

Shares of the Seattle-based Amazon were up 1.6% on Thursday to $3,200.08.

Analyst Michael Levine, who kept a buy rating on the shares, said in a note to clients that Amazon’s advertising was only 5% of revenue, but is a “far greater contributor” to overall non-Amazon Web Services EBIT margins than Wall Street recognizes.

“Said differently,” the analyst said, “if advertising was viewed as a stand-alone business unit … it would represent well north of 300% of 2020E non-AWS EBIT.”

Based on his view that there is “massive upside” to estimates by fiscal year 2024, the analyst increased the firm’s target to a Wall Street-high of $4,500. 

Levine thinks investors are “materially underestimating”

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