Amazon.com, Inc. (NASDAQ:AMZN) is preparing for its next Prime day on July 12, and analysts are releasing their estimates for what kinds of numbers the online retailer might see on that day. Some believe the company could double the amount of sales it recorded last year. Meanwhile Prime Video has enjoyed another win, while Amazon itself has picked up a price target increase, although it comes with rather bearish commentary.
Amazon price target upped by SunTrust
SunTrust Robinson Humphrey analysts increased their price target for Amazon from $710 to $775 per share but maintained their Neutral rating on the stock. Analyst Robert Peck believes it will be difficult for the online retailer’s stock to outperform that of its peers because competition in the space is on the rise. He believes this will negatively impact the company’s ability to grow its revenue and expand its margins. He notes also that capital intensity is high and that Amazon’s comparisons will get more and more difficult as the year goes on.
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He adds that revenue estimates for the second quarter look “reasonable, given the Prime flywheel is working, 3P is growing faster than 1P, and AWS adoption continues unabated.” Amazon management guided for sales to be between $28 billion and $30 billion for the second quarter, representing a growth rate of 23% to 34% year over year, compared to the 28% and 22% growth rates observed in the last two quarters.
Prime Day expected to be huge for Amazon
Amazon is busily promoting its second annual Prime Day on July 12, and MKM Partners analyst Rob Sanderson believes last year’s event drove $375 million to $400 million in incremental sales last year in just a single day. He notes that sales on Alibaba’s Singles Day event grew 5.6 times on the third year of the event and 3.7 times in the fourth year. Now the one-day event records $14 billion in sales for the Chinese online retail giant. As a result, he believes it’s “realistic” to expect Amazon’s Prime Day to bring double the sales as last year’s event.
The analyst notes that Amazon has grown its Prime membership base significantly as Prime enjoyed a 51% increase in members last year. Also participation in Fulfillment by Amazon is expanding rapidly as almost half of seller units were fulfilled by the company last year, up from about 40% the year before.
He adds that last year merchants sold out of products quickly on Prime Day, but he believes they will be better-prepared this year with more inventory. Amazon is promoting more than 100,000 deals in ten countries and said that there will be twice as many TVs offered on Prime Day than there were on Black Friday and Cyber Monday combined. Additionally, the online retailer has already kicked off the event with countdown deals.
Amazon consensus might be too low
Unlike Peck, Sanderson believes consensus estimates for Amazon could actually be too low as Wall Street is projecting 300 basis points of revenue growth deceleration between the second and third quarters in the company’s e-commerce businesses. He notes that management said Prime Day had about a 200 basis point impact on e-commerce growth last year, which implies $375 million to $400 million in sales. If the company can double that, reaching $750 million to $800 million in sales this year, it would add 350 basis points of upward bias on sales growth in the e-commerce segment for the third quarter, the analyst adds.
For comparison, Peck believes the 2014 Prime Day has set Amazon up for a difficult comparison in the third quarter.
Shares of Amazon rose by as much as 1.13% to $736.61 during regular trading hours on Wednesday.