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Amazon 'Well-Positioned' Going into the Holidays, JPMorgan Says

Amazon should surpass Walmart as the largest U.S. retailer in 2022, a JPMorgan analyst says.
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Amazon  (AMZN)  is well-positioned going into the holidays, a JPMorgan analyst said Wednesday, and should surpass Walmart  (WMT)  as the largest U.S. retailer in 2022.

Analyst Doug Anmuth said in a research report he continues to expect a strong online holiday season, "albeit against tougher comps and with a resurgence in physical retail."

"Amazon is well-positioned, having doubled its fulfillment network over the past 2 years, and should remain about 40% of US e-comm spend," Anmuth said. "Amazon remains our top overall idea."

The analyst said he believes Amazon will surpass Walmart as the largest U.S. retailer in 2022.

"Amazon started offering Black Friday deals on 10/4, the earliest start to the holiday season ever," he said, "before introducing thousands of more Black Friday & Cyber Monday Weekend deals."

Overall, Anmuth said, he believes the decision to accelerate the timing of holiday deals indicates Amazon "already maintains significant inventory into the holiday season and is well-equipped to handle elevated holiday demand." 

"Most importantly," he said, "we believe pulling forward holiday promotions should help Amazon efficiently manage through current macro supply chain congestions and minimize gaps in first party and third-party inventory and delivery delays."

Amazon has doubled fulfillment capacity since the pandemic began, the analyst said, and is now caught up on capacity, even pulling forward some 2022 fulfillment/distribution network into 2H21, which could drive an easing level of investment into next year.

The analyst said he expects U.S. online holiday sales to grow more than 14.5% year-over-year, coming off of outsized pandemic-driven growth of more than 32% year-over-year during the 2020 holiday.

He said key drivers include strong consumer confidence, increased disposable income, resurgence of brick and mortar retail sales following pandemic constraints and lockdowns in 2020, and one more shopping day between Thanksgiving and Christmas.

"While port congestion issues persist, we believe the Port of LA/Long Beach transitioning to 24/7 operation increases throughput and should help truncate wait times," he said.

Separately Guggenheim, analyst Seth Sigman assumed coverage of Amazon on Monday with a buy rating and $4,300 price target.

Sigman said in research note that he sees potential for a "significant positive inflection" in early/mid 2022 for Amazon compared with its moderating sales and margin trends more recently.

The analyst, who launched coverage on direct-to-consumer e-commerce stocks, said he is positive on the group entering fiscal 2022. 

Online channel share gains should reaccelerate early next year after months of declines and normalizing consumer spending growth may be good for the stocks, Sigman said.