Amazon Garners Price Target Increase to $3,400 on Strength in Pandemic

The longer that consumers remain sheltered in place, the higher the likelihood that online buying will become an established habit, according to Credit Suisse.
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Amazon.com  (AMZN) - Get Report shares firmed Friday, even while the Nasdaq Composite index fell, after Credit Suisse analyst Stephen Ju raised his share-price target for the retail colossus to $3,400 from $2,760.

Ju kept his rating at outperform. Amazon’s strength amid the coronavirus pandemic led him to increase his price target.

Ju lifted his growth forecast for Amazon’s gross merchandise volume (GMV), excluding currency effects, to 28% year-on-year in the second quarter from 21% previously. GMV is the total amount of sales done on Amazon websites, including those sold by the company itself and by members of its marketplace.

Amazon recently traded at $3,007, up 0.68%, compared to a 0.69% decline for the Nasdaq Composite. 

Ju boosted his GMV forecast “on stronger e-commerce growth stemming from the ongoing effects of the current health crisis,” he wrote in a commentary. “The longer consumers remain under shelter-in-place, the higher the likelihood of the new behaviors learned during quarantine to become newfound habits.”

By “habits,” he was referring to online buying. The pandemic has closed stores and kept consumers at home, leading to a surge in online purchases.

For the long term, “this potential change in habit is most important for Amazon’s groceries effort, as it remains the largest pool of offline dollars for online adoption,” Ju wrote.

“And with higher GMV estimates come higher fulfillment capacity investment requirements. We have hence raised our e-commerce segment capital expenditure estimates for 2020/2021 to $17.5b for both years,” compared to prior estimates of $16.5 billion and $11 billion, respectively, Ju added.

Amazon shares have soared 62% year to date.

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