RBC Analyst Forecasts 45% Upside for Amazon

RBC Analyst Forecasts 45% Upside for Amazon
September 4, 2019


The shares of the e-commerce giant Amazon.com, Inc. (Nasdaq: AMZN) is forecast to appreciate by over 50% in the coming year, according to Mark Mahaney, an analyst at RBC. Specifically, in his research note to clients, Mahaney has stated that the company’s intention to introduce the “Prime One-Day Shipping” program in the US is expected to boost the revenue and share price in the months to come. Following the report, the stock closed at $1,789.84, up $13.55 or 0.76% from prior close. The stock has appreciated 18% in the year-to-date through Tuesday.

The RBC analyst believes that Amazon’s one-day shipping scheme is increasing subscriptions to Amazon Prime and correspondingly more spending by households having Prime memberships. Mahaney estimates revenue to increase between 7% and 15% due to an increase in Prime membership.

In June, Amazon introduced the next day delivery facility to Prime members. The company’s implementation of its plan to bring down the two day delivery time to one is anticipated to garner nearly $24 billion in additional revenues. The revenue forecast has been made assuming a 150 to 340 basis point increase in Prime adoption and a 5% to 11% rise in spending per member.

In April, the company revealed its $800 million Capex plan for 2Q 2019 to bring down the delivery period from two days to one day. The facility will initially be offered in North America and later rolled out worldwide.  With an effort to minimize delivery time, the company has quickly reached 100 million Prime members.

Mahaney points out that Amazon is putting in efforts to achieve one-day delivery because consumers prefer the products they have order to be delivered quickly and in a convenient manner.

Notably, Amazon’s launch of free two-day delivery via its Prime membership has totally modified the e-commerce landscape ad pushed its competitors to offer similar delivery alternatives.

Mahaney said the company’s one-day program could have a similar impact. In his research report to clients, Mahaney explained that Amazon is once again setting a trend which others are forced to follows. Mahaney said: “We believe that once Amazon builds an even greater loyal user base with free one-day delivery, the industry may have to follow, again.”

Regarding the revenue outlook, said: “With one-day as the catalyst, we now model sustained revenue growth acceleration and raise [2020 estimated] Revenue to $337B.”

Citing the introduction of the firm’s ‘Prime One-Day Shipping’ program in the US over the next one year, RBC Capital market envisions Amazon shares appreciating by about 50% in the forthcoming year. The investment research firm forecasts a price of $2,600 per share, reflecting a gain of roughly 45% from yesterday’s closing price.

The analyst report is expected to turn the stock bullish in the short-term.

The historical price chart indicates that the stock is consolidating at 1,700 levels. The Chaikin money flow indicator is having a positive reading. Furthermore, the stock is also trading above its 50-day moving average. As a result, we can expect the stock to move up in the short-term.

amzn - technical analysis - 4th Sept 2019

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Janine is our editor for related stock market news. Andrew and Janine will be focusing on providing the latest trends and where the next hit could be

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