Amazon.com, Inc. (NASDAQ:AMZN) is expanding in more ways than one. The online marketplace is continuously increasing its Fulfillment by Amazon program, product offerings, and Amazon Prime services. Furthermore, Amazon reached a multiyear print and digital publishing agreement with HarperCollins, a New York publishing house.
Fulfillment by Amazon, or FBA, is Amazon‘s service that sells individuals’ and businesses’ products to whomever buys them on the website. With the “You sell it, we ship it” motto, FBA allows businesses to store their products in Amazon warehouses and have Amazon pack and ship the goods to customers. FBA has helped Amazon incorporate local commerce into their offerings and the service is continuing to expand.
R.W. Baird conducted a survey of Amazon’s product selection in the first quarter. The survey found that more than 300 million products are now available on the e-commerce website. The product categories of Cell Phones & Accessories, Video Games, and Grocery/Gourmet Foods are embracing FBA at the highest rate, while Beauty, Automotive, and Pet Supplies have the lowest rate of FBA adoption.
Amazon Prime services are growing as well. Amazon continues to add features to the service, such as cloud storage and the Instant Video platform, to entice customers to upgrade to Prime. The service costs $99 a year and offers free two-day delivery on most items. In February, analysts at Macquarie Research estimated that 50% of people in the US will subscribe to Amazon Prime by 2020.
On April 14, analyst Colin Sebastian of Baird maintained an Outperform rating on Amazon with a price target of $425. Sebastian noted that the online marketplace continues to expand its offerings “at a fairly rapid clip,” which is “among the key levers for retail segment growth” and a “fundamental [driver] of the company’s unit sales growth.” Sebastian sees further growth potential in the FBA program and in Amazon Prime. Amazon’s FBA service continues to grow, which Sebastian views as a mean of “creating a virtuous cycle of increasing Prime subscriptions, further category expansion and greater unit velocity.”
Colin Sebastian has rated Amazon 24 times since April 2009, earning an 85% success rate recommending the stock and +20.1% average return per AMZN rating. Overall, Sebastian has a 69% success rate recommending stocks with a +14% average return per recommendation.
Separately on April 14, analyst Brian Pitz of Jefferies maintained a Buy rating on Amazon and raised his price target from $400 to $465. Pitz revised his earnings estimate, boosting his 2015 earnings per share estimate from a loss of $0.04 to a positive $0.35. Likewise, the analyst increased his 2016 full year estimate from $1.03 to $2.46. Pitz increased his outlook due to beliefs that “Amazon’s fulfillment strategy is helping the company deliver a superior customer experience (which should drive unit and revenue growth) while extracting optimal value from each customer.” The analyst views this strategy as “part of a bigger, multi-faceted strategy focused on better customer segmentation and category leadership,” which he expects to bring “[revenue] growth acceleration in the medium to longer-term and margin improvement with scale.”
Brian Pitz has rated Amazon 12 times since July 2011, earning a 90% success rate recommending the stock with a +16.6% average return per AMZN rating. Overall, Pitz has a 67% success rate recommending stocks with +14.6% average return per recommendation.
On average, the top analyst consensus for Amazon on TipRanks is Moderate Buy.