Amazon (AMZN) stock isn’t immune to the overall market downtrend, but UBS top analyst Eric Sheridan says it’s a good time to pick some shares up, anyway. The analyst considers the online retail giant to have a “healthy Prime ecosystem” in the U.S. as usage grows from existing subscribers. Moreover, Sheridan believes even though 50% of U.S. households have a Prime membership, there’s still opportunity for Amazon to grow wallet share of the existing Prime base and even get more members in the future.
For the bullish view, Sheridan reiterates a Buy rating for the stock with a price target of $2,100, which shows a potential upside of 52%.
According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, 5-star analyst Eric Sheridan has a yearly average return of 13% and 64% success rate. Sheridan has a 27.7% average return when recommending AMZN, and is ranked #91 out of 5,079 analysts.
The Prime model is a smart one. The service, which is fairly inexpensive, offers a variety of perks like free shipping and returns, music and programming among other services. The result? A loyal customer-base. One study that the analyst considers to have revealed surprising data, was the results of a survey showing a downtick in the number of Prime members who shop for groceries on Amazon more than once per month: “In our view, Amazon is still in its early days of ramping its cross-marketing campaigns across platforms (e.g., Whole Foods products on Amazon & Prime offering with in-store promotions). We believe, if executed properly, making online grocery shopping more compelling to a larger base of Prime & non-Prime members could act as a tailwind for the flywheel over time (as the category is most critical in terms of scaling wallet share given US consumer spend dynamic),” Sheridan comments.
The analyst continues to explain Prime has seen solid growth in recent years, with a high penetration in the U.S. and strong subscription growth internationally: “We expect this trend to persist and forecast Prime subs to grow at a ~30% ’17-’22 CAGR. Looking forward, we expect the largest portion of that growth to come from International as Amazon continues to push into India and other key markets. Amazon’s logistics capabilities and continued FBA adoption (higher Prime-eligible SKUs, free 2-day shipping, etc.) are largely driving the value proposition of the Prime membership.”
Wall Street tends to agree with Sheridan’s confidence on the online retail giant, considering TipRanks analytics reveal AMZN as a Strong Buy. Out of 37 analysts polled in the last 3 months, 36 are bullish on AMZN stock while only 1 remains sidelined. With a return potential of nearly 56%, the stock’s consensus target price stands at $2,150. (See AMZN’s price targets and analyst ratings on TipRanks)