Wedbush Research recently initiated coverage of Amazon.com Inc. (NASDAQ:AMZN). Though the analysts are not all that bullish on Amazon stock, they are incredibly bullish on the internet retailer as a company. Amazon.com Inc. (NASDAQ:AMZN) is on the way toward killing physical retail.
The report asserts that the current Amzon.com Inc. (NASDAQ:AMZN) position of biggest online retailer will lead to the company establishing itself as the world’s leading retailer. The report, which was authored by analysts Michael Pachter, Nick McKay and Nick Citrin, rated Amazon.com Inc. (NASDAQ:AMZN) a Neutral and put a price target of $330 on the company’s shares.
Amazon is the retail leader
The Wedbush analysts believe that Amazon is already the “go to” place for everyday purchases like printer cartridges and batteries as well as many other products. Amazon has managed this by building distribution centers across the United States. This allows the company to deliver goods to customers fast.
Fast delivery means that Amazon.com Inc. (NASDAQ:AMZN) could get into perishable goods very soon. That could be the beginning of the end for traditional retailers. Persihable goods have long been thought immune from the internet’s need to kill brick-and-mortar establishments.
As Amazon.com Inc. (NASDAQ:AMZN) expands, margins in physical retail will drop further and further. Amazon is investing huge amounts of revenue into price competition. Lower margins will gradually kill off many physical retailers, leaving Amazon.com Inc. (NASDAQ:AMZN) the dominant force in retail around the world.
Power not profitability
If that thesis makes you think about investing in Amazon.com Inc. (NASDAQ:AMZN) it may be time to think again. There’s a reason that the analyst put a Neutral rating on the company, while believing it will dominate retail in the years to come. Amazon is incredibly highly valued right now, and the company does not care about its margins.
That means that shares in Amazon are not expected to rise much higher unless there is a structural change in the company or the market. Amazon.com Inc. (NASDAQ:AMZN) is growing incredibly quickly, but its earnings are not following the same trend. The retailer actually lost money in 2012, despite its market power.
Amazon.com Inc. (NASDAQ:AMZN) may become the most powerful force in world retail, but the company might not make much money along the way. Amazon has never paid a dividend, and with current profits what they are, it’s unlikely they will any time soon.