It is well known by now that Amazon (AMZN) has benefited immensely from COVID-19, drawing in new customers who prior to the viral outbreak had no experience of the e-commerce world. However, with the outsized demand has come the need to increase the workforce. Before the summer, Amazon hired an additional 100,000 workers and last month in anticipation of the holiday season, announced another round of hiring, intent on adding another 100,000 staff members.
While Benchmark's Daniel Kurnos believes “costs could be a potential headwind for 2H20,” the 5-star analyst points out the continued uptick in COVID-19 cases, particularly in Europe “will keep consumer demand at all-time highs for the foreseeable future.” Additionally, heading into the holiday season, Kurnos argues, Amazon has already “weathered most of the cost increases.”
The expected surge in demand means Amazon is facing some “supply headwinds,” the results of which, it is frantically trying to expand fulfillment capacity by as much as 50%, according to estimates.
What does all mean? Kurnos believes the “unabated, unprecedented ecommerce demand” sets up Amazon to be “a material share gainer this holiday period.”
“We believe the recently announced Prime Day in mid-October is less about driving consumer demand and more about spreading out the expected surge in levels of consumer spending during the holiday season,” Kurnos said. “We do expect some revenue upside in 3Q and for the full year even after taking our numbers up by 3% to 33% and 26% y/y growth, respectively.”
To this end, Kurnos reiterated a Buy rating on the shares and increased the price target from $3,675 to $3,800. The implication for investors? Upside of 15.5%. (To watch Kurnos’ track record, click here)
Amazon holds a unique position on Wall Street, with 37 analysts tracking the stock and all recommending it as a Buy. Price target upgrades keep pouring in, and the Strong Buy consensus rating is backed by a $3,758 price target, implying possible upside of 14% from current levels. (See Amazon stock analysis on TipRanks)
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