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What to Expect From Amazon's E-commerce Business in 2022

Amazon stock underperformed the market in 2021. Here's what its e-commerce segment needs to do to boost the stock in 2022.

Despite strong performance in its cloud computing and advertising businesses, Amazon's  (AMZN) - Get, Inc. Report stock ended 2021 with a gain of less than 7%. The main culprit appears to be the company's weaker-than-expected e-commerce sales, which have a huge impact on the stock.

Since the e-commerce industry as a whole is poised to keep expanding, let's dig deeper into Amazon’s e-commerce revenue projections for 2022 and what we can expect from Amazon stock in 2022.

Will Online Sales Grow in the U.S.?

Here in the U.S., Amazon is the undisputed leader of the online retail industry. Data from Statista shows the Seattle-based company held 41% of the U.S.e-commerce market in 2021.

In 2020, online sales skyrocketed as people stayed at home due to COVID-19 and replaced trips to the shopping mall with visits to Amazon's site. But when brick-and-mortar businesses began reopening in 2021, e-commerce sales grew at a slower clip.

Analysts project e-commerce sales in the U.S. to grow 17.3% in 2022 (slightly slower than 2021’s 17.9% growth). This would suggest we'll see e-commerce growth that's more in line with 2021 than with 2020.

Still, preliminary data suggests the 2021 holiday season was surprisingly good for online retailers, settling positive expectations for the next year. In fact, post-pandemic projections for Amazon’s revenues predict accelerated growth, compared to pre-pandemic trends.

Figure 2: Amazon's North America revenue TTM.

Figure 2: Amazon's North America revenue TTM.

Amazon's International Segment Is Ready to Grow

On the other hand, analysts are more optimistic about the global e-commerce market. Online sales are expected to grow about 14% in 2022, compared to 10% in 2021. Although we can't definitively say how much of that will be absorbed by Amazon’s International segment, expectations are more bullish than bearish.

Global e-commerce growth seems to have an impact on Amazon's projected revenue. Post-pandemic trends show a much steeper slope than the pre-pandemic curve:

Figure 3: Amazon's International revenue TTM.

Figure 3: Amazon's International revenue TTM.

Should You Buy the Amazon Dip?

In 2022, we no longer have to deal with tough year-over-year comparisons with 2020. But we can’t ignore all of 2021's challenges, such as labor supply shortages, supply chain constraints, and inflation concerns. As the Amazon Maven has previously argued, investors shouldn't expect outstanding results in the short term.

That said, we believe Amazon’s long-term narrative as an e-commerce, cloud, advertising and streaming business makes it a strong candidate to outperform in 2022. The company holds a strong buy consensus on TipRanks and an average target price of $4,130 — which would be a 22% upside.

In order for Amazon's stock to regain traction in the market, we need one of these two scenarios to come true:

  1. E-commerce industry grows in 2022 as much as it did in 2021. Amazon’s heavy infrastructure investments allow the company to leverage its massive scale and steal market share from its competitors.
  2. U.S. e-commerce growth surpasses expectations, allowing Amazon to grow beyond Wall Street’s projections. This should influence a new rally.

If you're bullish on Amazon's potential, you might want to consider buying its stock while it's down.

(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting the Amazon Maven)