In a world where Amazon.com, Inc. (NASDAQ:AMZN) might be taking on a grocery store twist in its massive outreach while Facebook Inc (NASDAQ:FB) determinedly spars off against Snapchat for dominion of the social media spectrum, analysts from Morgan Stanley and Instinet are out with research reports backing the buying opportunity of these two stocks. Let’s take a closer look:
Amazon: Your Next Neighborhood Grocer?
The question on everyone’s minds this week is whether Amazon is about to step into the grocery-verse, considering Josh Kosman of The New York Post fed the rumor mill buzz that sizeable super market-style brick-and-mortar robot-staffed locations are underway from the e-commerce and online retail giant. Though AMZN CEO Jeff Bezos has shrugged off the Post’s conjectures as a shot in the dark, charging they had surely “mixed up their meds!” to be so far off, Morgan Stanley analyst Brian Nowak weighs in from a bullish stance amid the swirling speculation.
In reaction, as he ponders “What if Amazon is your next neighborhood grocer,” the analyst reiterates an Overweight rating on AMZN with a price target of $900, which represents a just under 11% increase from where the shares last closed.
Nowak sees this news as a positive for the giant, elaborating, “[…] as the near-term downside is that a store build will require incremental investment. Because while the specifics of the grocery store operating margin impact to AMZN is yet to come (stay tuned…but our initial take is that AMZN’s more efficient and productive grocery stores could generate higher than average grocery (~4%) or current AMZN (~0.5%) retail operating margins), there is likely to be material upfront cash investment from building and opening grocery stores.”
Furthermore, “Grocery is an important order/traffic velocity driver too, given the average US consumer visits the supermarket 1.6X per week. As such, AMZN’s ability to capture this traffic flow creates upsell opportunities across it other categories. Competitive in-store pricing and Prime membership being required to enter AMZN grocery stores could drive Prime growth too,” Nowak contends.
According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, four-star analyst Brian Nowak is ranked #716 out of 4,382 analysts. Nowak has a 66% success rate and earns 4.9% in his yearly returns. When recommending AMZN, Nowak gains 21.8% in average profits on the stock.
TipRanks analytics exhibit AMZN as a Strong Buy. Based on 31 analysts polled by TipRanks in the last 3 months, 29 rate a Buy on Amazon stock while 2 maintain a Hold. The 12-month average price target stands at $936.90, marking a 15% upside from where the stock is currently trading.
Facebook Vying to Trounce Snapchat Competition with Instagram Stories
On the heels of Facebook’s rival Snapchat filing for an initial public offering last week, Instinet analyst Anthony Diclemente is chiming in with an increasingly upbeat perspective on the social media giant. As far as Diclemente sees the social media race, Snapchat in the long-term will not be able to touch Facebook’s surge forward. Therefore, the analyst reiterates a Buy rating on shares of FB with a $165 price target, which represents a close to 25% increase from current levels.
Diclemente asserts, “We grow more confident in our view that Snapchat is unlikely to negatively affect Facebook’s growth trajectory in a direct way,” as he praises new Facebook and Instagram modifications that “[…] have moderated or perhaps reversed share shifts in time spent between Snapchat and Facebook’s properties.”
Considering Snapchat’s recent downturn in user growth, the analyst believes Facebook’s acquisition of Instagram is paying off in spades. The analyst does not see it as a coincidence that Snapchat’s dip in user growth arose on back of Facebook’s introduction of Instagram Stories.
Overall, “Snap Inc. appears to be coming public later in its growth cycle than other internet companies, adding just 5mn global daily active users (DAUs) last quarter, demonstrating just 3% sequential growth. By contrast, at the time of their respective IPOs, Facebook and Twitter were growing nearly twice as fast. During 2016, Snapchat added 51mn DAUs, globally; by comparison, Facebook added 190mn DAUs in 2016. Our checks indicate that Facebook maintains a substantial lead in mobile app downloads. Further, Facebook appears to be introducing products with competitive use cases to those of Snap. For example, the Snap S-1 explicitly indicates that Instagram Stories may be directly competitive to Snap. We come away reassured that Facebook maintains the ability to mitigate competitive threats via product innovation […] Snapchat’s user growth decelerated through 2H16, following the launch of Instagram Stories,” Diclemente concludes.
As usual, we like to include the analyst’s track record when reporting on new analyst notes to give a perspective on the effect it has on stock performance. According to TipRanks, five-star analyst Anthony Diclemente is ranked #206 out of 4,381 analysts. Diclemente has a 68% success rate and realizes 11.3% in his annual returns. When suggesting FB, Diclemente yields 17.5% in average profits on the stock.
TipRanks analytics demonstrate FB as a Strong Buy. Out of 37 analysts polled by TipRanks in the last 3 months, 34 are bullish on Facebook stock and 3 remain sidelined. With a return potential of nearly 22%, the stock’s consensus target price stands at $160.18.