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Online Shopping Trends Another Good Omen for Amazon; Analyst Raises Price Target

support@smarteranalyst.com (Ben Mahaney)

The coronavirus has extended its stay. The alarming rise in cases over the past week has raised the question whether parts of the economy need to shut down again. According to Sun Trust Robinson analyst Youssef Squali, whether the broader economy remains open or closed, Amazon (AMZN) stands to benefit.

And who can argue with such an assessment? While the coronavirus still rages on, Amazon has only added new customers and cemented its status even further as the e-commerce king.

A recent survey revealed to Squali “several reasons to stay positive on the stock.” These include,” Squali said, “1) COVID-19 catalyzed a faster transition to ecommerce, which we believe is here to stay; 2) AMZN acquired brand-new customers to the platform, and who are likely to stick; 3) AMZN’s NPS (net promoter score) is the best amongst peers, with the vast majority of customers expecting to at least sustain, if not increase their purchase frequency post pandemic.”

No doubt, the pandemic accelerated trends that were already in place before. Among the survey’s findings are that 20% of those polled bought physical goods online for the first time during the pandemic. 46% also said they would keep on purchasing online, “more frequently” following the pandemic’s demise. Only 8% said they will reduce online shopping post-Covid.

Amazon’s NPS (Net Promoter Score) vs. peers such as eBay, Wayfair and Etsy, in which the e-commerce leader rated highest, indicates to Squali, it is the “stickiest,” with 96% of “new and reactivated customers,” indicating they will keep on shopping with Amazon.

There are more figures backing up claims online shopping is on the rise. A recent report by Adobe showed that $82.5 billion was spent online in May, up 78% year-over-year.

The transition to ecommerce is a global trend, as recent survey data from GlobalWebIndex indicates. Between 23-35% of consumers in some of Western Europe’s leading economies (France, Germany and Italy) say they will be less likely to visit a physical retail store once COVID-19 fades from view.

“With Amazon’s strong position in Western Europe in general, and in these three countries in particular, we expect the company to be a prime beneficiary,” Squali concluded.

Down to the nitty gritty, what does it mean for investors? Squali reiterated a Buy on Amazon while raising the price target from $2,700 to $3,400. Investors could be pocketing a 23% gain, should Squali’s target be met over the next year. (To watch Squali’s track record, click here)

Amazon has strong backing from the rest of the Street. AMZN’s Strong Buy consensus rating is based on 39 Buy ratings vs. 2 Holds and 1 Sell. The average price target is more conservative than Squali’s, and at $2,825.47, represents modest upside of 2.5%. (See Amazon stock-price forecast on TipRanks)

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