Stifel analyst Mark Kelley has joined the bull camp, predicting that Amazon.com Inc.’s stock will surge by 30%. In his coverage initiation, Kelley gave a buy rating to Amazon shares (AMZN) with a price target of $173. He lauded the company’s vast scale in the retail industry and highlighted its success in leveraging its size to establish related businesses, such as advertising.
Kelley’s optimism stems from his belief that Amazon will exceed expectations for operating margins, thanks to advancements in its fulfillment efforts. The recent transition from a national to a regionalized fulfillment network has not only improved the efficiency of Amazon’s network but has also made same or next-day delivery more predictable. This change has allowed the company to offer expedited shipping for a greater number of stock-keeping units (SKUs).
Furthermore, Amazon’s management has indicated additional improvements that could boost the company’s margin profile beyond pre-pandemic levels. Kelley is particularly excited about the potential growth of Amazon’s advertising business. While Amazon pioneered what is now known as retail media, the company is expanding its advertising operations by introducing ads on Prime Video.
Overall, Kelley’s analysis suggests a bright future for Amazon, highlighting its strong prospects for surprising Wall Street positively.
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Amazon’s Ad Tech Tools and Partnership with Pinterest
According to a recent analysis, Amazon offers a wide range of ad tech tools, including a demand side platform, making it a strong player in the advertising industry. Moreover, the company has also become a Pinterest advertising partner. This not only highlights Amazon’s influence in the e-commerce market but also makes it an attractive option for businesses looking to advertise their products on popular platforms like Pinterest.
Amazon’s Growth Trajectory and Favorable Valuation
Despite having gained 58% in share value this year, Amazon still presents an attractive investment opportunity. Analyst Kelley believes that the stock is currently trading at an “attractive” valuation, with a price-to-earnings ratio of about 11 based on consensus expectations for two-year forward adjusted earnings before interest, taxes, depreciation, and amortization. This valuation is particularly appealing considering Amazon’s expected growth trajectory and expanding profit margins that are projected to continue until 2025.
Analysis of eBay, Etsy, and Wayfair
In addition to covering Amazon, Kelley also began providing coverage for other e-commerce platforms, including eBay, Etsy, and Wayfair. For eBay, he acknowledges the progress the company has made in its technology-enabled strategy and its focus on attracting higher-quality buyers. However, he believes that it may take some time to see the full benefits of the ongoing turnaround efforts that have been underway for a few years.
As for Etsy, Kelley recognizes the uniqueness of its platform but expresses concerns about recent trends showing a decrease in habitual buyer activity. He also has reservations about discretionary spending patterns as we move into 2024.
On the other hand, Kelley commends Wayfair for its efforts to expand the online home-furnishings market. However, he notes that there has been some pressure on average order values as customers allocate more funds towards services rather than purchases.
Overall, while Amazon presents compelling opportunities for investors, Kelley advises holding positions on eBay, Etsy, and Wayfair, taking into consideration the specific challenges and growth potential of each platform.