Cowen analyst John Blackledge is feeling the winter spirit and taking his bets as 2019 comes in. He considers Amazon (AMZN) his “best idea” for 2019. Some drivers behind his decision include more B2C eCommerce gains with large verticals on tap including apparel and grocery as well as an emerging B2B eCommerce business and rising margins driven by AWS and AMZN advertising.
With that enthusiasm, the analyst reiterates an Outperform rating on AMZN stock with a price target of $2,250, which implies about 47% upside from current levels. (To watch Blackledge’s track record, click here)
The analyst estimates the operating income margin (GAAP) to rise to 6.2% in 2019 after having risen dramatically in 2018 up to 5.5% in comparison to 2017’s 2.3%. In the long term, Blackledge forecasts a low double-digit incremental operating income (GAAP) margin. Blackledge suggests though the company is quite established and doing well financially, he sees areas that have room to grow.
“Despite AMZN’s share appreciation and fairly consistent media focus, there remain areas that are under-appreciated or misunderstood. For instance, AMZN is one of the few global companies capable of adding $100+ BNs in addressable opportunity consistently by entering and scaling in massive domestic and/or Int’l markets. For example, since launching its eCommerce offering broadly in India (May ‘13), AMZN has entered Mexico (Jun ’15) and Australia (Dec ’17), adding ~ $1.8TN in retail opportunity, while its emerging B2B biz, Amazon Business, is now live in 7 countries outside the US, including UK, Germany, France, Italy, Spain, India. and Japan. In the US alone, AMZN serves nearly 80% of the top 100 enrollment education organizations, 55 of the Fortune 100 companies, >50% of the 100 biggest hospital systems and >40% of 100 most populous local governments,” Blackledge explains.
The analyst goes on to suggest the impact of Prime is likely under-appreciated as well. He views the service as the main long-term driver for Amazon’s retail business. Blackledge’s data shows U.S. Prime households totaled to around 60 million, about 9% year-over-year ahead of the holiday shopping season. The analyst foresees more and more households in the U.S. purchasing Prime memberships.
Overall, Wall Street’s confidence backing this retail giant is strong, with TipRanks analytics showcasing AMZN as a Strong Buy. Based on 38 analysts polled in the last 3 months, 37 rate a Buy rating on Amazon stock, while only one recommends Hold. The 12-month average price target stands at $2,153.57, marking a nearly 35% upside from where the stock is currently trading. (See AMZN’s price targets and analyst ratings on TipRanks)