With Black Friday just behind us, and Cyber Monday about to explode, holiday shopping season madness is in full swing.
As the early stats come in, the numbers point to Friday’s online sales party being the largest ever, raking in $7.4 billion in transactions. Monday’s online sales are expected to come at $9.4 billion, beating last year’s $7.9 billion. Naturally, one popular name hoping to reap rewards is online shopping giant, Amazon (AMZN).
The tech behemoth’s stock hasn’t had the most stellar year. Despite its share price recording gains of 19%, the number falls short of the S&P 500’s 25% year-to-date increase. Since the end of July, in particular, the stock has stubbornly refused to gain any ground. Nor has an underwhelming Q3 report helped matters, either. While revenue beat analysts’ estimates, earnings per share and revenue guidance missed the analysts’ forecast.
Part of the reason for the earnings miss can be attributed to the company’s transition of its Prime service’s shipping speed from two days to one. The move has cost the company $1.5 billion, but as the shopping spree reaches maximum fever, the move is likely to pay off. The company has also been investing heavily in its cloud computing platform AWS (Amazon Web Services) and its advertising arm, both of which belong to sectors set for growth over the next few years. The cloud services market is projected to be worth over $500 billion by 2022, while digital advertising is likely to be worth $517 billion by 2023.
SunTrust Robinson’s Youssef Squali expects the holiday season to be strong, and points to a number of macro drivers to support his thesis for AMZN. Among them are high employment and consumer confidence which should boost purchasing power, wider adoption of mobile commerce, and more streamlined logistics.
Squali said, “We’re incrementally positive on AMZN going into what should be a robust holiday season, given the company’s outsized growth within US ecommerce, of which we estimate AMZN will claim ~37% of total GMV this holiday season vs. ~35% last year. This is driven by a broader selection; faster shipping (1-day free shipping on 10M+ items) for Prime users; secular shift online with record store closings; and private labels (esp. Amazon devices). Vs. our estimate of +19% Y/Y growth in NA sales (ex. stores) for AMZN in 4Q19, Adobe projects U.S online holiday sales (Nov.-Dec.) at $143.7B, +14.1% Y/Y.”
The 5-star analyst reiterated a Buy rating on AMZN alongside a price target of $2,350, which indicates a solid upside potential of about 30%. (To watch Squali’s track record, click here)
All in all, the bulls are out almost in full on this one. The analysts’ ratings over the last 3 months breakdown into 35 Buys and a single Hold, marking Amazon as a Strong Buy. The price target sits at $2,156.41, indicating possible gains of 20% could be on the (gift) cards for the e-commerce leader. (See AMZN stock analysis on TipRanks)