Amazon.com, Inc. (Nasdaq: AMZN) stock is up another 47 percent in 2018, a familiar site for long-term investors. The latest analyst checks on Amazon Prime membership suggest shareholders may be in for another familiar experience later this month when Amazon reports a big earnings beat and guidance raise.
According to GBH Insights head of technology research Daniel Ives, Amazon Prime and Whole Foods are creating a “flywheel” effect for Amazon that Wall Street still doesn’t fully appreciate.
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“With a major overlap between Whole Foods shoppers and Prime members, there is golden opportunity in our opinion to use both these distribution channels to catalyze higher grocery (basket sizes) and retail sales among members, while driving non-Prime members that are Whole Foods shoppers into Prime members in the near-term,” Ives says.
In June, Amazon expanded its 10 percent Whole Foods discount for Prime members to 10 additional states.
Ives says Amazon is brilliantly entrenching its services deeply into its users’ daily lives, allowing those services to complement one another and drive sales.
“This is part of the broader consumer flywheel strategy implemented during 2Q that will enable Amazon to become further entrenched in the daily lifestyle and spend cycle of consumers worldwide, from its iron grip e-commerce engine to grocery stores and health care in 2019,” Ives says.
All the while, Amazon is beefing up its advertising business, which could potentially be an extremely valuable asset given the company’s user engagement levels. Amazon also still has plenty of international growth opportunities to bring new customers into its self-propagating ecosystem.
Ives says the Amazon Prime growth trajectory is better than consensus expectations, and it’s likely that Amazon will beat market expectations for the second quarter and raise its guidance for the second half of the year.
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Ives estimates Amazon’s AWS cloud services business is worth between $300 billion and $350 billion and its core consumer business is worth between $600 billion and $650 billion. He says Amazon will likely hit the $1 trillion market cap mark within the next 18 months and should account for roughly 50 percent of all U.S. e-commerce spending by 2019.
GBH projects Amazon will reach at least $80 in earnings per share by 2022. The firm has an “extremely attractive” rating and $2,000 price target for AMZN stock.
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All Signs Point to an Amazon.com, Inc. (AMZN) Earnings Beat originally appeared on usnews.com
