Amazon: Third-Party Growth Is Evidence Of Payback To Long-Term Investors, Says William Blair

In a research report released today, William Blair analyst Mark Miller maintained an Outperform rating on Amazon (AMZN) as Amazon’s third-party sales growth accelerated to 40.4% in July, a further step-up from growth of 34.4% in June, 28.1% in May, and 27.0% in April. Impressively, Amazon’s third-party sales growth has accelerated every month of 2014.

Miller noted, “Many consumers (and investors) are not aware that Amazon provides fulfillment for third-party sellers even when the transaction occurs on a competitors’ platform. While Amazon enables third-party sellers to offer a better level of service to consumers off platform, compared to them doing fulfillment on their own, the more-important, longer-term positive is that third-party sellers are partnering with Amazon more deeply by maintaining their inventory in the Amazon fulfillment centers. It’s a more-recent development, but in July the unit volume of third-party FBA usage off the Amazon platform doubled versus a year ago (and now represents 2% of all FBA orders). This is a high-value, annuity-like fee stream that investors should covet.”

Furthermore, the analyst wrote, “With the second-quarter earnings release, investors chose to focus on the projected loss in the third-quarter guidance, which is understandable given the uncertainty of near-term returns with AWS, digital content, and devices. From our vantage point, the acceleration in third-party growth is evidence that the stepped-up investments by Amazon are creating a tangible payback. We don’t know whether it is attributable to added confidence with rollout of sortation centers ahead of the holiday season, or a more-robust ecosystem in general, but it reinforces our belief that management is making rational decisions for the long term.”

According to, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Mark Miller has a total average return of 4.0% and a 58.6% success rate. Miller has a -5.7% average return when recommending AMZN, and is ranked #1309 out of 3242 analysts.

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