Amazon Price Target Raised to a Street High $3,300 by RBC Despite "Disturbing" Trend
Online Retail is a “Structural Winner from the COVID Crisis” and Amazon is likely the best global play off of Online Retail, according to RBC analyst Mark Mahaney. The internet analyst raised his price target to $3,300 (from $2,700), suggesting nearly 40% upside.
COVID-19 eCommerce bump: It is no secret the pandemic accelerated the use of online shopping. Mahaney points out that “Y/Y non-store sales (per U.S. Census Bureau) accelerated for four consecutive months from January – April, reaching a recent record high of 22% Y/Y in April.” What matters, though, is whether the rate will maintain momentum moving forward. RBC’s survey suggests that “the surge in Online Shopping demand has created a sustainable shift in consumer behavior.”
Loyalty is lucrative: RBC’s survey indicates strong growth in Prime users and in frequency of spending.
Prime penetration jumped to 67%, compared to 59% in 2019. Mahaney emphasizes that Amazon is quickly approaching 200 million Prime subscribers worldwide, up from 150 million in January.
64% of Amazon customers make at least 2-3 purchases per month, up from 54% in 2019, according to RBC. Furthermore, nearly half of survey respondents said they spent more than $200 over the last 3 months.
(Amazon Can’t Get No) Satisfaction: There is one blemish on Amazon’s COVID-19 report card. RBC’s survey found a “disturbing” trend of declining and record low satisfaction from Amazon customers.
64% of Amazon customers describe themselves as “Extremely” or “Very Satisfied,” down from 73% last year. Additionally, a record high 11% of customers describe themselves as “Slightly” or “Not At All Satisfied.” Mahaney notes the eroding contentment could reflect COVID-related delivery delays and unavailability of items.
The other guys: Amazon has solidified itself as a blue-chip internet staple. While RBC calls Amazon the best global play for Online Retail, recent performance of other eCommerce companies suggest there might be more upside elsewhere. Here’s a look at year-to-date performance of some notable online retailers:
Shopify: +80%
Etsy: +76%
Chewy: +69%
Amazon: +35%
