Top ranked analyst Gene Munster weighs in on online retail giant Amazon.com,Inc. (NASDAQ:AMZN) and Google parent Alphabet Inc (NASDAQ:GOOGL), as Amazon expands their private label brand portfolio and Google is expected to announce a new VR product at its conference on May 19th.
Munster reiterated an Overweight rating on Amazon after the WSJ reported that Amazon will announce new private label brands to their portfolio. Munster provided a price target of $800.
Amazon’s introduction of new private label brands including Happy Belly, Wickedly, Prime, and Mama Bear is expected to have a neutral impact on gross profit dollars as the private label has a higher margin but lower price. Private label brands, according to Munster will account for a fractional at best percentage of the 7.2 billion items sold by Amazon this year. The “big story” according to Munster is whether Amazon does something with private label that is Prime exclusive, which will make existing Prime users more engaged and “quicken the Prime flywheel.”
AmazonBasics has been Amazon’s successful private label and is expanding into new verticals. The division offers 729 items including electronics (379), cell phones & accessories (79), Home and Kitchen (70), office products (50), in Industrial and Scientific (42), Patio, Lawn and Garden (31) and Automotive (24).
According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Gene Munster has a yearly average return of 17.5% and a 59% success rate. Munster has a 37% average return when recommending AMZN, and is ranked #5 out of 3910 analysts.
Out of the 45 analysts polled by TipRanks, 40 rate Amazon stock a Buy, while 5 rate the stock a Hold. With a return potential of 12%, the stock’s consensus target price stands at $805
In addition, Munster reiterated an Overweight rating on shares of Alphabet with a price target of $911, as he expects google to announce its new “Android VR” product at the Google I/O conference on May 19th.
Munster is expecting that VR headsets will make up the majority of VR sales over the next 10 years. He also believes Google will release an upgraded Google Cardboard that will compete with the Samsung Gear VR. Google is well positioned in the VR space, according to Munster as the company has made a $500 million investment in Magic Leap. Further after surveying LinkedIn profiles, Munster discovered that Google is adding headcount in VR and AR and now has more VR/AR employees than Facebook and HTC combined.
Breaking away from using smartphones for VR is critical, according to Munster, because it will allow for a more “immersive” VR experience. These custom components could allow users to bring their hands into the VR world and eventually move around untethered in a virtual environment. Components driving this will likely be custom displays, lenses, Vision Processing Units, and Graphic Processing Units.
Lastly, according to Munster, evidence points to Google shifting into the VR space through their talent acquisition. Google has ~350 employees with VR experience. Further, google has ramped VR hiring in the past 9 months with 59% growth comparing to Facebook at 40% and Apple at 30%.
Out of the 35 analysts polled by TipRanks (in the past 3 months), 34 analysts are Bullish on Alphabet Inc, while 1 analyst remains neutral. The stock’s consensus target price is $914.53, marking a potential upside of 26.98%.