Every so often, analysts engage in a sort of “mine’s bigger than yours” battle over price targets, especially over big names like Amazon.com stock. One firm fires the first shot, and then it’s like all-out war after that. This time Credit Suisse made the big move with a massive price increase (and massive price target) for Amazon.com stock. Meanwhile, Piper Jaffray released the results of its latest “Taking Stock with Teens Survey,” which found that Amazon continues to take mindshare.
In a note to investors dated Oct. 11, analyst Stephen Ju said he has raised his price target for Amazon.com stock from $1,100 to $1,350 a share. The online retailer and cloud services provider hasn’t yet scheduled its third-quarter earnings report, but it’s expected to be late this month.
Ju said that so far, the combination of Amazon’s Prime Now with Whole Foods is what he had been expecting in late 2013 and early 2014 when Amazon Fresh was rolled out. He added that his cross-referencing between Whole Foods stores and Prime Now delivery zones has revealed just a 50% overlap, so there is room for easy expansion of the service.
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Rather than pricing, which is what has captured the headlines since the Whole Foods transaction closed, Ju expects services to be the front line where Amazon battles competitors. His much higher price target for Amazon.com stock results from his inclusion of Whole Foods in the company’s financials.
However, it seems he mainly raised his price target because he expects the company’s e-commerce operating margin expansion to resume as it “grows into its larger infrastructure.” He also looks for continuing margin benefits as the company’s shipping losses moderate and predicts an upward bias to revenue models for Amazon Web Services and a “more moderate deceleration path.”
Of note, 1010Data also said in a recent report that Amazon’s brick-and-mortar expansion should enable it to reduce shipping costs and also makes it more dominant in its best-performing markets. The firm found that of Amazon’s and Whole Foods’ 15 top-grossing markets, 12 coincide and account for 17% and 32% of their total sales, respectively. 1010Data explained that the online retailer could deploy Amazon Lockers in all Whole Foods locations. The firm estimates that Amazon spent $7.2 billion on shipping last year, which amounted to triple its full-year profit.
1010Data also reported that Amazon Prime shoppers also like to shop at Whole Foods, and Prime members were already spending more at Whole Foods than non-Prime members. That’s an interesting statistic that makes the grocery store chain’s acquisition make even more sense for the online retailer.
In addition to these current trends, Amazon is also set up for a strong future of continued growth. Piper Jaffray analyst Michael Olson reiterated his $1,200 price target and Overweight rating on Amazon.com stock in a note to investors dated Oct. 11. He also revealed the results of his firm’s “Fall 2017 Taking Stock with Teens Survey,” which covered more than 6,000 U.S. teens.
The survey revealed that Amazon is gaining mindshare, rising from 43% a year ago to 49% this fall. Amazon mindshare grew 670 basis points from the Spring, which beat their expectation of only a slight increase because it is growing off an already-large base. Compared to Walmart or Target, Amazon mindshare was “nearly infinite more.” Both big box retailers had “statistically insignificant” mindshare numbers among teens.
In fact, eBay is the only other non-apparel retailer with “measurable mindshare among teens,” Olson added. Piper Jaffray asked teens about their favorite websites to shop on and received these results:
Further, Prime adoption continues to grow, as 66% of teens said their families had a Prime membership versus 60% in the Spring and 58% in Fall 2016. Olson estimates that the number of Prime households in the U.S. is somewhere between the high-60 million to low-70 million range, although this number is “growing at a decelerating rate.” Most of the new Prime households came from middle or lower income households.
Amazon is clearly aware of how important it is to capture mindshare among teens and convert them while they’re young because they are the next generation of consumers. The online retailer announced today that shoppers between the ages of 13 and 17 can sign up for an Amazon Household account to shop on its online marketplace. Parents still have control over these accounts, but they allow for limited independence. Parents must approve or deny any purchase the teens make, and teens can include a note to say why they want or need whatever the item is in an attempt to convince their parents.
Shares of Amazon.com stock ticked higher by as much as 0.32% to $990.37 during regular trading hours on Wednesday.