Amazon stock underperformed. Two analysts advise buy now.
com has produced amazing growth in recent quarters, the stock has remained neutral, up just 4% for the year to date, behind the general market by almost 10 percentage points. Some analysts believe that the underperformance offers an opportunity for investors.
Jefferies Analyst Brent Thill On Wednesday, designated Amazon (ticker: AMZN) shares a franchise pick, repeating a buy rating and a stock price target of $ 4,200. Amazon shares rose 0.8% to $ 3,410.38 on Wednesday.
He wrote in a research note that Amazon is expected to benefit from both increased ecommerce adoption and faster growth in higher margin cloud and advertising businesses. The stock’s recent performance leaves it at a discount of around 10% from historical norms in terms of multiple of forward earnings before interest, taxes, depreciation and amortization, he noted.
While investors have moved away from some of the winners of the pandemic era, and e-commerce growth is not slowing down as retail stores resume more normal operations, Thill said Amazon’s outlook is bleak. doubt better than ever.
Behavioral changes resulting from the pandemic have led to a permanent increase in e-commerce adoption, Thill said. He also said the growth of Amazon Web Services and advertising would more than offset any short-term slowdown in core retailing resulting from comparisons to the high sales of the pandemic era.
Thill said an exclusive survey of around 700 U.S. adults about their shopping habits found 60% are spending more online since the start of the pandemic. And 63% of that group say they continue to do so even now that the restrictions have been lifted. “Amazon is clearly standing out,” he said, with 77% of consumers continuing to spend more on the site since the restrictions were lifted.
By designating Amazon as a franchise choice, Thill removed that status for Alphabet (GOOGL). He said that while he continues to love Alphabet stocks, the stock’s 39% rise this year leaves it at a 10% premium over its historical average.
Meanwhile, JP Morgan analyst Doug Anmuth took a deep dive into Amazon Prime and reported that the service, priced at $ 119 per year, offers a value of around $ 1,000 per year. This not only includes free delivery of many products sold on Amazon, in some cases same day, but also Amazon Prime Video, Prime Music, and grocery delivery from Amazon Fresh and Whole Foods.
He noted that the company has invested heavily in Amazon Prime content, including the ongoing acquisition of MGM and the purchase of the broadcast rights to Thursday Night Football, while also expanding its podcast offering on Amazon Music. . The company also added Amazon key, a garage delivery service to more than 5,000 US cities.
Anmuth said Amazon hasn’t raised the price of Prime since 2018, when it raised the rate to $ 119 per year, from $ 99. He believes that a price increase could occur as early as the second half of 2021.
The number of Prime subscribers will grow to 237.5 million in 2021, from 200 million last year, as more people overseas sign up, Anmuth predicted. He said Amazon could increase its international subscribers by over 50 million in current markets and that there are many more markets the company could add over time. He estimates that the number of subscribers for 2021 will include around 91.9 million in the United States and 145.6 million internationally.
Anmuth reiterated his overweight rating and his price target of $ 4,600 on Amazon stocks.
Write to Eric J. Savitz at [email protected]