As brick-and-mortar stores fall to the wayside, approaching beyond 1,200 closures, top analyst Youssef Squali at Cantor spotlights a “big opportunity” waiting in the wings for Amazon.com, Inc.’s (NASDAQ:AMZN) taking. Particularly as the online auction and e-commerce leader continues its surging tide of new private label offerings, the analyst reiterates an Overweight rating on shares of AMZN while boosting the price target from $965 to $970, which represents a just under 13% increase from where the stock is currently trading.
Squali comments, “The combination of accelerating brick-and-mortar store closings, the rise in Amazon’s private label offerings, its enormous scale and superior value proposition put it on pace to dominate the new Retail. We believe Amazon can capture 20-40% of a $2.5B annual revenue opportunity […] from the closure of some 390 physical stores (and counting) across the country. A successful private label strategy should drive revenue growth and strengthen Amazon’s value proposition to consumers and benefit margins over time.”
With e-commerce on a 15 to 20% year-over-year rise, and Amazon benefiting by capturing 35% market share, the analyst believes Amazon’s subtle private label push allows it to accomplish three key things: “1) use its vast trove of data to see where demand/supply is most uneven; 2) take control over the supply of important SKUs; 3) increase gross margins; and boost competitive loyalty with members.” Though Amazon presently has 18 private brands under its belt, Squali predicts this is only the beginning.
“The Electronics vertical generates the bulk of Amazon’s private label sales, but Apparel holds a significant opportunity, accounting for $24B of gross sales. With the launch of 10+ private brands, as well as numerous store closures, we believe Amazon is set to disrupt this segment,” Squali surmises, backing the company’s blended private label sales with confident expectations for escalating operating profit margins.
Youssef Squali has a very good TipRanks score with a 69% success rate and a high ranking of #73 out of 4,556 analysts. Squali garners 12.4% in his annual returns. When recommending AMZN, Squali gains 35.9% in average profits on the stock.
TipRanks analytics demonstrate AMZN as a Strong Buy. Out of 29 analysts polled by TipRanks in the last 3 months, 28 are bullish on Amazon stock and 1 remains sidelined. With a return potential of 11%, the stock’s consensus target price stands at $950.77.
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