What’s not to love about Amazon (AMZN)?
Even as the company lost 30% of its value in the last few months of 2018, most investors are still pretty bullish on the company moving forward. Amazon continues to prove its not only a force in retail, but technology, advertising, delivery and logistics. The company continues to take advantage of Americans’ changing shopping habits, as the shift to e-commerce remains strong.
The holiday shopping season only served to help Amazon, as the company showed its hasn’t lost its luster, even as Walmart and other companies’ online divisions are growing rapidly. Barclays analyst Ross Sandler sees this continuing. The analyst reiterates an Overweight rating on AMZN stock, with a $1,950 price target. (To watch Sandler’s track record, click here)
Sandler is “optimistic about the 1Q guidance for AMZN,” though says “one more quarter of decelerating growth” is cause for slight concern. One area of concern for Sandler is Europe. The analyst expects weaker 4Q results from the geography, amid warnings from ASOS and FedEx. He adds that “weakening economic data”, is also “likely to point to some deceleration in Europe.”
Nevertheless, the analyst is “very constructive” on Amazon’s long-term potential and expects strong North American results in Q4 to offset Europe. Sandler says, Amazon likely “benefited from extra shipping days this holiday, free shipping and lower 3-P fees.”
Looking forward, Sandler expects “unit growth to remain in the mid-teens, potentially accelerating from Diwali. More importantly, retail GP growth ex-WFM should grow nearly 30% ex-fx and remains key to the bull case. The recent USD weakness may help 1Q guidance on top of lapping the accounting changes.”
Aside from e-commerce, Amazon is developing its delivery network and aims to compete with UPS and FedEx. Shipping accounts for a significant portion of Amazon revenue — by bringing in-house, Amazon hopes it can improve profit margins. The company is also looking to make their delivery segment compete with FedEx and UPS on shipments from other sellers, which would result in yet another revenue stream. Of course, its AWS segment remains strong as ever (a major boost to profit margins) and revenue from advertising is also growing, as customers continue to use Amazon as a search engine for goods.
All in all, Wall Street loves Amazon. TipRanks tracking of 39 analyst ratings on the company shows a consensus Strong Buy, with 37 analysts recommending Buy and only two recommending Hold. The average price target is $2,138.43, representing a 30% upside from current levels. The most confident analyst goes as high as $2,450 – the lowest price target is still $250 higher than its current value. (See AMZN’s price targets and analyst ratings on TipRanks)