Amazon (AMZN) entered 2018 as the king of retail and may exit the year as the king of the stock market. The company is in a fierce battle with Apple and Microsoft over wearing the “World’s Most Valuable Company” crown, as retail sales and its AWS segment has helped propel its stock more than 25% so far this year. Amazon continuous domination in e-commerce is the primary driver to its surging revenue, while its on-demand cloud computing platform is inflating Amazon’s normally-low profit margins.
Baird analyst Colin Sebastian doesn’t see Amazon’s growth coming to a stop anytime soon; the analyst maintains his Outperform rating on AMZN with price target of $2,100, which implies about 44% upside from current levels.
According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, 5-star analyst Sebastian has a yearly average return of 19.1% and a 63% success rate. Sebastian has a 42.9% average return when recommending Amazon, and is ranked #30 out of 5,107 analysts.
Amazon recently announced it would reduce referral fees (take rates) and fulfillment fees. Sebastian says he believes “the general impact of the fee changes will likely include…greater selection and higher sales volume” of low-priced consumable products (including grocery and health) and higher-priced jewellery and future items. However, the analyst expects “slightly lower 3P Marketplace profit margins, at least initially, assuming lower overall 3P take rates.”
Sebastian believes, “competition may be on factor in lowering category fees.” The analyst points out that the company is focused on growth and lowering these fees will attract more sellers to its platform and grow product selection and sales volume. Sebastian says, “in this scenario, the Amazon Marketplace could be more competitive with traditional retailers such as Walmart and Target, which currently sell significant volumes of consumables, and with online vertical sites such as Wayfair in the Furniture/Home Décor category.”
Sebastian isn’t the only top analyst singing the stock’s praises. TipRanks tracking of 38 analyst ratings on the company shows a consensus Strong Buy, with 36 analysts recommending Buy and only two recommending Hold. The average price target is $2,150.74, representing a 47% upside from current levels. The most confident analyst goes as high as $2,450 – the lowest price target is still $400 higher than its current value. (See AMZN’s price targets and analyst ratings on TipRanks)