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As Amazon (AMZN) heads into its second-quarter earnings report on Thursday after the close, investors may want to take renewed stock of the tech behemoth's legacy e-commerce business.

RBC Capital Markets analyst Mark Mahaney says that the business still has significant room to grow and may be under-appreciated by investors. 

"By our estimate, AMZN already accounts for roughly 20% of U.S. online retail sales, but the company's strong mobile positioning and infrastructure advantages facilitating next-day and SDD (Same-Day Delivery) should allow Amazon to continue to take share," RBC Capital Markets analyst Mark Mahaney wrote in a note on Monday evening.

This analysis comes even as Walmart (WMT) ramps up its heavy investment in next-day delivery for users. Amazon said in May it would be moving to upgrade its two-day shipping service to one-day shipping for Prime members, and Walmart soon followed with news of its own next-day service. Meanwhile, Amazon is investing more in fulfillment centers to stay ahead of Walmart. Mahaney noted Walmart's attempts to be competitive, but maintained Amazon has a "strong lead." Part of his confidence is predicated on his belief in Amazon's management. "We are positive on management given their consistency, operational and strategic track record, focus on innovation and customer service," he said.

Amazon's global online stores revenue is expected to come in at $29.987 billion for the second quarter, according to consensus estimates from FactSet. Importantly, that's a 10.4% year-over-year growth rate, a deceleration from last year's growth rate of 14%. For his part, Mahaney is looking for second-quarter online stores sales of $30.2 billion. 

While some have grown cautious on Amazon's e-commerce business as revenue and profit grow more quickly in other business such as Amazon Web Services and advertising, Amazon still has considerable potential to grow this business. Mahaney estimates that e-commerce's share of total U.S. retail sales will rise by roughly one percentage point this year from its current share of 11%. There is "still significant secular growth for online retail," Mahaney said. 

Overall, Mahaney thinks there is "modest upside on revenue and operating income," for the quarter for Amazon. He has a $2,300 price target, representing 15.8% upside from the current level.

Amazon shares were down 0.47% to $1,976.33 on Tuesday early afternoon. The stock is up 29% year-to-date, outperforming the S&P 500's gain of 19%. 

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