One analyst says Amazon's share gains could be even bigger in 2021 than 2020 because the pandemic has 'permanently inflected' e-commerce sales — and it'll last long after brick-and-mortar shopping…

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Amazon logo The COVID-19 pandemic stands to boost multiple parts of Amazon’s business, from e-commerce to advertising, Bernstein analyst Mark Shmulik wrote Tuesday.

  • Bernstein analyst Mark Shmulik upgraded Amazon to “Outperform” Tuesday, maintaining his price target of $3,400 for the company’s shares.
  • The pandemic has “permanently inflected” e-commerce sales, he wrote, and Amazon’s share gains in that market will be “stickier” than rivals.
  • Amazon’s share price, which has fallen from highs above $3,500 in recent weeks, makes the company attractive to new investors, Shmulik wrote.
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Amazon started 2020 “stuck in neutral,” according to Bernstein analyst Mark Shmulik.

No more, he said in a research note Tuesday.

While many e-commerce players have benefited from the pandemic-prompted rise in online shopping, Amazon is likely to keep many of the share gains it has made as a result of COVID-19, which would only add to its prowess in online retail, Shmulik wrote. He upgraded Amazon’s shares to “Outperform” and kept his $3,400 price target.

“eCommerce has permanently inflected and everyone is being treated like a winner, but we conclude in our recent work on the sustainability of the shift that Amazon is positioned to increase their dominant share position when the return to physical stores occurs,” the analyst wrote.

That marks a shift from the start of the year when Amazon, while still a force, was facing slowing e-commerce trends as well as mixed results from attempts to break into new businesses, such as grocery and IT distribution for businesses.

“COVID has pulled forward secular trends, from eCommerce to digital advertising and Cloud, with Amazon as a primary beneficiary across all three revenue pools,” Shmulik wrote.

Amazon shares have declined in recent weeks, making the picture for potential investors more appealing, he added. Shares of the Seattle-based company have fallen from their peak above $3,500 earlier this month and were at $3,088.42 in afternoon trading Tuesday.

Shmulik wrote that Prime customers and third-party merchants, both groups that tend to have long-term relationships with Amazon, have become especially dependent on the company’s offerings during the pandemic, making Amazon’s gains during the period “stickier.” 

“Said differently, Amazon’s share gains could be even more pronounced in 2021 than in 2020,” he wrote.

Amazon’s advertising business, meanwhile, has proved “incredibly resilient through the worst of COVID-19,” Shmulik wrote, predicting that it could reach $35 billion in revenue and contribute as much to EBIT as Amazon Web Services by 2023.

A Global Asset Management Seoul Korea Magazine

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