When it comes to Amazon, analysts are finding plenty to like. Not only has the busiest time of the year for shopping arrived, but the company also holds dominant positions in the cloud and video. It seems that analysts hardly know which aspect of Amazon to focus on because it shines brightly in all three areas.
Strong holiday sales growth expected
Like it or not, but the holiday shopping season starts earlier and earlier every year, and it’s already underway. JPMorgan analyst Doug Anmuth and team released their “2016 eComm Holiday Outlook” on Thursday, providing the results of their annual e-commerce pricing survey. Unsurprisingly, it looks like Amazon dominates.
Overall, they predict a “healthy” holiday shopping season this year, as they look for between a 3.3% and 4% year over year increase in retail sales this year, compared to last year’s 2.1% to 3.2% growth. They expect the improved labor and wage market to drive the growth in retail sales, along with higher consumer confidence, greater growth in disposable personal income, and two extra shopping days between Thanksgiving and Christmas.
With the S&P 500 falling a double-digit percentage in the first half, most equity hedge fund managers struggled to keep their heads above water. The performance of the equity hedge fund sector stands in stark contrast to macro hedge funds, which are enjoying one of the best runs of good performance since the financial crisis. Read More
The JPMorgan team anticipates a 17% increase in online holiday sales, marking a modest acceleration from last year’s 16% growth rate. They believe mobile will drive this year’s increase with a 55% increase in mobile e-commerce sales, which they expect to make up roughly 22.5% of e-commerce sales. They also see Amazon itself as a driver of growth in online sales but also expect traditional retailers to also see their own e-commerce sales make up a greater percentage of their sales.
Amazon’s pricing remains on top
Anmuth and team peg Amazon’s share of the U.S. e-commerce market at around 35% to 40%, and they believe it’s growing at about double the rate of the overall U.S. e-commerce market.
The online retailer is following a holiday strategy that’s similar to what it did last year, including a Black Friday Deal Store that’s focused on Prime subscribers, who receive early access to lightning deals. Based on this, they believe Amazon is positioned well to keep gaining share of the e-commerce market.
They report that Amazon is still the leader in their proprietary pricing survey, as they found that it had the lowest prices in seven of the 12 baskets they looked at and also overall. Walmart is on top in three of their baskets, compared to four last year, and Target led the way in two of their baskets, which is an improvement from last year.
However, they add that Amazon’s command over pricing has weakened, as some retailers are getting their prices closer. Wal-Mart’s prices were only 2% higher than Amazon’s, while Target‘s prices were only 6% higher, both on an overall basis.
Shares of Amazon rose by as much as 0.87% to $762.99 during regular trading hours on Friday.