Which name is the best global play off of online retail? If you ask RBC Capital’s Mark Mahaney, the answer is Amazon (AMZN).
After conducting the 8th annual U.S. Online Shopping Survey, with a significant focus being placed on AMZN, Mahaney concluded that the online retail space is the clear structural winner emerging from the COVID-19 pandemic.
Expounding on this, the five-star analyst stated, “Our survey results and industry data suggest that adoption of Online Shopping has accelerated materially, and we view Amazon, Walmart, Etsy, and eBay as beneficiaries of this secular shift. Specifically, year-over-year non-store sales (per U.S. Census Bureau) accelerated for four consecutive months from January – April, reaching a recent record high of 22% year-over-year in April.” The results also indicate that there has been a major shift in consumer behavior resulting from the increased online shopping demand.
Specifically looking at Amazon, there was a significant improvement in frequency and spend trends, with 64% of customers making at least two to three purchases per month, up from 54% in 2019. Additionally, the number of consumers spending over $200 in the last 90 days also got a boost.
Mahaney added, “Most importantly, Prime penetration surged to 67% vs. 59% in 2019 — we see Amazon rapidly approaching 200 million Prime subs worldwide, up from 150 million in January. This will be a real long-term benefit as Prime customers are the most loyal Amazon users.”
While these results are encouraging, there’s somewhat of a dark cloud hanging over Amazon. The eCommerce giant is experiencing historically low customer satisfaction levels. It should be noted that sentiment still swings positive, but the trend is troubling, in Mahaney’s opinion. “It could reflect COVID-related delivery delays and unavailability of essential and non-essential items, but we will continue to monitor this,” he explained.
Based on all of the above, it’s no wonder Mahaney reiterated his bullish call. Not to mention he brought his price target, which previously came in at $2,700, up to $3,300. This target puts the potential twelve-month gain at 27%. (To watch Mahaney’s track record, click here)
What does the rest of the Street think about Amazon’s long-term growth prospects? It turns out that most other analysts also have high hopes. 38 Buys, 2 Holds and a single Sell have been received in the last three months, which put the consensus rating at Strong Buy. In addition, the $2,700.94 stock-price forecast suggests 8% upside potential.
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