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Amazon could surge 37% in 2019, Cowen says

Heidi Chung
Reporter

Amazon (AMZN) has been on a tear this year, and there’s even more room to run in 2019, according to one analyst.

John Blackledge, senior internet analyst at Cowen, says Amazon is the firm’s best bet in 2019. Blackledge’s price target on the company is $2,250, which represents 37% upside from Tuesday’s closing price.

Amazon stock has soared 41% in 2018 and has outperformed both the broader market and its retail rivals, the S&P 500 (^GSPC) has risen 0.5%, and the retail ETF (XRT) has fallen 3% in the same time period.

Blackledge explained that further market share gains in apparel and grocery, significant international growth opportunities, the ability to maintain Amazon Web Services dominance and advertising will be the key drivers to Amazon’s revenue growth and rising margins over the next year.

Furthermore, Blackledge argued that there’s a big part of Amazon’s business that goes under-appreciated: Amazon Prime. “The impact of Prime and path for further penetration are perhaps under-appreciated. We view Amazon Prime as the long-term driver of Amazon’s retail business,” he said.

Amazon apparel

Amazon’s growth in the apparel category is also capturing the attention of analysts.

Wells Fargo’s senior analyst Ike Boruchow agreed with Blackledge that Amazon’s apparel business has the ability to steal even more market share.

According to Euromonitor research, the gross merchandise value (GMV) of apparel and footwear sold on Amazon was around $25 million in 2017.

U.S. apparel and footwear sales in 2017 (Euromonitor, Wells Fargo)

Boruchow projected that Amazon’s GMV will exceed $30 billion this year and surpass the leader, Walmart (WMT). “The apparel/footwear industry is very fragmented, and this actually made Amazon the second-largest seller of apparel and footwear in the U.S. last year (behind only Walmart). Furthermore, the $30.8 billion GMV for apparel/footwear that we project for Amazon in FY18E could vault them into the #1 position (unless Walmart grows its apparel business 6% or more this year).”

While it is no secret that Amazon has disrupted brick-and-mortar retail, Boruchow emphasized that investors should start paying attention to Amazon’s hard push into the apparel space. “Their slow and shifting strategy with apparel indicates that though Amazon has considerable scale and many advantages to be a threat to the vast majority of apparel retailers.”

Heidi Chung is a reporter at Yahoo Finance. Follow her on Twitter: @heidi_chung.

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