In a research report dated Jan. 6, Morgan Stanley (NYSE:MS) analysts  upgraded, Inc. (NASDAQ:AMZN) to an “Overweight” rating.


This comes as analysts viewed, Inc. (NASDAQ:AMZN)’s global fulfillment network as a strategic asset that will push market share gains through the next decade. They have forecast a 23.5% global GMV share and a increase for 2016 net sales to $166 billion, up from the previous $145 billion estimate.

Other highlights from the report includes the following:

* Analysts project $1 trillion in global eCommerce sales by 2016 as compared to 2012’s $512 billion. For, Inc. (NASDAQ:AMZN), there’s an estimate for GMV Market share to be 14% this year, rising to 23.5% in 2016. This surpasses the previous 20.6% forecast.

*’s fulfillment network is underappreciated and for future success in offline and online retail, it will depend on last-mile fulfillment capabilities. Amazon has the ability to cut variable unit-costs for fixed-costs while expanding its margins and growing market share.

* Risks need to be taken to see reward. China, which is a big market, can provide large investments as, Inc. (NASDAQ:AMZN) is ranked No. 4 in GMV there. Through a price-conscious market and the requirement to create a fulfillment, it suggests the company will undergo a large battle that will bring low international margins.

* Analysts have a $325 price target based upon a DCF valuation analysis. They also have a 11% WACC and a 5% perpetual growth rate.

In other research report nuggets, analysts cited the following rationale for their “Overweight” rating as well as potentials risk and catalysts for the company.

Why an “Overweight” rating?

  • is best positioned to grow market share from global eCommerce sales.
  •’s fulfillment network will enable it to leverage margins and cut shipping costs.

Key Value Drivers

  • Paid unit growth in owned-inventory and 3P
  • International sales should achieve rising eCommerce penetration, more so than domestic sales, thanks to demographics, but less contribution margin within the mid-term.

Potential Catalysts

  • The continuous strength of Apple Inc. (NASDAQ:AAPL) products such as its iPhones and iPad products, will be incrementally negative for as its moves from physical to digital media products
  • A quicker than expected move from offline to online retail sales
  • Sales tax enforcement of eCommerce sales via state governments
  • Additional expansion of the Kindle eReader into international markets is another strong positive

Potential Risks

  •, Inc. (NASDAQ:AMZN) faces competitive threats from Apple and others as media sales transition to digital distribution with top-line sales decelerating; its product mix will determine the overall profitability impact.
  • Investment spending needs could be higher than expected as it grabs market share–notably in China.