The pandemic has accelerated changes that were already in motion. Consumers’ shift to online shopping was already in progress, but lockdown measures brought a whole new demographic into play. According to Wells Fargo analyst Brian Fitzgerald, a “review of omnichannel retailer commentary,” indicates that between March and May, digital commerce exhibited “continued strength.” The trend has been maintained, even as brick and mortar stores have begun opening again.
Along with the increasing digital demand, omnichannel retailers have had to adjust, and some “have rapidly launched or expanded local fulfillment capabilities leveraging store footprints.” Consumers have reacted enthusiastically, as evidenced by Target’s recent numbers. Same-day services grew by 278%-plus year-over-year, as reported in the retail giant’s F1Q20 earnings release.
But what does this mean for traditional pure play e-commerce companies? Or, specifically, the daddy of them all, Amazon (AMZN)? Fitzgerald has an answer.
“While we note ramping local fulfillment capabilities and exceptionally strong ecommerce data pts from omnichannel retail competitors, we nonetheless expect that AMZN is likely to benefit from exceptionally strong e-commerce demand in 2Q, likely extending into 2H20,” said the 5-star analyst.
Although Fitzgerald believes the reopening of society has meant a boost for BOPIS (buy online pick in store) and curbside businesses, a trend worth keeping an eye on, the analyst points out Amazon’s “continued build-out of last-mile fulfillment capacity,” along with consumers’ return to both normality and hectic work/school schedules, will likely “shift momentum back toward rapid delivery (AMZN’s 1-day Prime and Prime Now) from competitors’ store-based fulfillment options.”
So, down to the nitty gritty, what does it all mean for investors? Fitzgerald reiterates an Overweight rating and gives the price target a bump – up from $2,725 to $3,000. Investors stand to pocket a 14% gain, should the analyst’s thesis play out in the coming months. (To watch Fitzgerald’s track record, click here)
Does the rest of the Street beg to differ? Hardly. 37 Buys vs 2 Holds and 1 Sell add up to a Strong Buy consensus rating for the e-commerce giant. At $2,733.83, the average price target indicates upside potential of nearly 7%. (See Amazon stock-price forecast on TipRanks)
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