Prime Day, Amazon’s “summer Black Friday”, has come and gone. Wall Street did not seem overly confident that this year’s event will be a game changer for Amazon stock (AMZN) - Get Report, which may explain why share price has remained stuck trading around $3,450 since mid-June.
Still, a few analysts believe that AMZN could still climb 30% from current levels. Following the important sales event on the e-commerce giant’s calendar, the Amazon Maven looks at the most recent opinions issued by Wall Street experts and assesses the bull case.
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Strength in e-commerce and cloud
At the highest level, Amazon makes money through two distinct businesses: e-commerce and cloud. Good news for the Seattle-based company and its shareholders, these industries have been growing fast lately – and Amazon enjoys an enviable position of market leadership in both.
Bank of America, whose analyst believes that Amazon stock can rise 27% from here, seems to know at least one key ingredient to Amazon’s success on the e-commerce side: its delivery system. Justin Post thinks that Amazon will grow its fulfillment footprint by 40% this year alone, the equivalent of Walmart’s entire distribution center space.
Mr. Post’s research aligns with the findings of Jefferies’ Brent Till, who has a $4,200 price target on AMZN. According to him, Amazon’s fulfilment capacity should rise about 50% in the next one to two years. The expanded infrastructure could allow Amazon to move to breakeven same-day delivery, and to compete better by bringing last-mile delivery in-house.
The improved distribution system may help Amazon with another of its businesses that could use a boost: groceries. Loop Capital reports that over 50% of Prime subscribers order groceries online, of which three-fourths use either Amazon or Whole Foods (an Amazon subsidiary) only. Some of the perceived issues with fresh produce availability could be addressed with a better delivery network.
On the other hand, cloud has not been a hot topic of conversation among analysts lately. But the Amazon Maven recently pointed out how the cloud infrastructure space (IaaS) grew at a dizzying 41% pace in 2020 – and Amazon remains the undisputed king of cloud, controlling 40% of the IaaS market.
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Not stellar, not terrible either
Lastly, and despite Amazon’s Prime Day 2021 not being a center-stage argument in most analysts’ investment theses, one bull still sees reasons to be excited. Evercore ISI has a $4,500 price target on AMZN, suggesting 30% upside from end-of-June share price.
The research shop noted that Amazon sold more than 250 million items on Prime Day, which represents a compounded annual increase of more than 20% over 2019. Considering that a pandemic and a flash recession took place within these past 24 months, Prime Day unit sales growth did not look bad at all.
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Plenty of analysts believe that Amazon stock can climb at least 30%. What do you think can get the share price from here to there in the next 12 months?
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(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)