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Top Analyst Reveals Key Takeaways on Amazon (AMZN) Following 6th Annual U.S. Online Shopping Survey

RBC Capital's Mark Mahaney sees Amazon showcasing"clear" leadership in the e-commerce market.


As far as top analyst Mark Mahaney at RBC Capital sees the situation, Amazon (NASDAQ:AMZN) is a definitive front-runner in the e-commerce competitive ring. That said, on back of his 6th Annual U.S. Online Shopping Survey, he maintains this e-commerce king is blazing full bullish steam ahead- albeit with some slight obstacles along the way.

Following the survey results, the analyst reiterates an Outperform rating on AMZN stock with a $1,900 price target, which implies an 11% upside from current levels.

First, Mahaney draws note to Amazon’s sustained killer “lead” in the Online Retail space. One prospective challenge, however, is that rival Walmart is “showing traction.” A predominant 90% of those polled chose Amazon for the Online Retail site used most frequently, which is 3% less than last year’s number, but aligns with momentum exhibited in 2015 and 2016. Amazon’s usage boasts more than twice over that of any of its site competitors, yet Mahaney recognizes Walmart’s standing has markedly grown stronger from 30% seen in 2015 to 39% this year. Another rival of Amazon’s is EBAY, a company whose standing has proven “consistent” throughout the course of the past three years, ranging from 34% to 35%. However, the analyst notes a rise in EBAY’s Frequency & Satisfaction levels that have “improved nicely this year.” Mahaney commends Amazon’s stellar “moats” that surpass its competition, all the same: “AMZN leads in terms of Price (by a 4X+ factor), & in terms of Selection & Convenience (7X+), evidence of the moats AMZN’s Shipping investments have created.”

Second, Amazon customers boasts “intrinsically high” satisfaction levels, but Mahaney notes a dip here. Of the consumers polled, 72% consider themselves to either be “Extremely” or “Very” Satisfied with the e-commerce king compared to 8% that are merely “Slightly” or “Not At All” Satisfied. This suggests “an intrinsically positive skew,” writes Mahaney, who adds that this skew though solid has lessened: “However, this skew was below the 82%-87% skew of the prior 5 years. Possibly, the increased mix of third-party sales has negatively impacted service levels, as AMZN may have a harder time controlling third- party quality.”

Third, encouragingly, frequency and spend trends circling in the Amazon customer base continue to be sturdy, pointing to a long-term upward trend. Of the analysts polled in Mahaney’s survey, nearly half (49%) of Amazon customers make a minimum of two to three purchases each month, which aligns with the level seen in 2017 and a rise from 2013 to 2015 levels. Meanwhile, 31% of these customers shelled out more than $200 throughout the past 90 days, which likewise matches the level reached last year and a jump from that observed in 2013 to 2015. “These are clear upward 6-year trends for Amazon customers’ shopping frequency & spend,” argues Mahaney.

Fourth, Amazon’s domestic Prime Penetration could have a plateau challenge on its hands. After all, “This was the first year when Prime penetration didn’t rise,” explains the analyst, a data point he did not anticipate: “A surprising result, which implies Prime expansion is likely mostly/totally driven by international markets. We see Prime’s value proposition as compelling, but AMZN may have to boost its Prime offering (more video, music, & faster shipping). This also raises questions about Prime Pricing Power…”

On a bullish fifth point, Amazon Prime’s value proposition continues to shine as “well intact.” Spanning Spend to Purchase Frequency to Intend to Spend & Satisfaction, the analyst spotlights a big gap amid Prime and non-Prime customers. Three quarters of Prime subs shop on Amazon twice to three times each month compared to 17% of non-Prime customers. The “longer customers are Prime, the more loyal they are,” points out Mahaney. Consider that 17% of non-Prime customers purchase two to three times each month against 56% for subscribers in their first year and 88% for Prime subscribers in their fourth year or more.

Lastly, the analyst recognizes a jump in interest in Same Day Delivery and Next Day Delivery, with over half of U.S. shoppers (57%) “Extremely” or “Very” Interested in SDD; a long-term trend Mahaney marks on an upturn. Moving forward, the analyst forecasts Prime Now coupled with Whole Foods integration will act as pivotal investment priorities in the coming few years.

Mark Mahaney has a very good TipRanks score with a 75% success rate and a high ranking of #12 out of 4,830 analysts. Mahaney realizes 27.4% in his annual returns. When recommending AMZN, Mahaney earns 55.3% in average profits on the stock.

TipRanks reveals a strong bullish consensus betting on this e-commerce empire. Out of 34 analysts polled in the last 3 months, a robust majority of 33 rate a Buy on AMZN stock while just 1 maintains a Hold. The 12-month average price target stands at $1,874.79, marking nearly 10% in return potential for the stock.