Following 2020’s outsized gains, the 2021 stock market has been less of a thrill for Amazon (AMZN) stock. It has been a choppy performance so far, and Amazon stock has dilly dallied in both directions without a conclusive move either way.
In fact, the depressed performance, says Jefferies’ Brett Thill means Amazon stock is now trading at a historically low EV/EBITDA multiple. This presents opportunity, as given the pandemic-led changes in consumer habits which have driven “permanent increase” in e-commerce adoption, Thill argues the stock is underperforming despite a fundamental outlook “that is arguably better than ever.”
It’s a conclusion reached following a recent Jefferies survey on consumers’ spending habits. The survey found that 60% of those questioned were shopping more online since the pandemic’s onset. Even after the easing of restrictions, 63% among those have ramped up their online spending, while only 15% have reduced their online shopping habits.
“Amazon is a clear standout,” the 5-star analyst noted, “With 77% of consumers continuing to spend more on the site since restrictions were lifted, followed by 26% at Walmart, 15% at Target, 15% at Chewy, 10% at eBay, and 9% at Etsy.”
Thill thinks Amazon Prime is behind much of the increased spending. Since Covid hit, 9% of US adults have joined the Prime club, and even when the pandemic fully retreats, ~80% of those expect to keep the service.
But it is not only Amazon’s e-commerce prospects which are looking strong. The company’s highest margin businesses “continue to thrive.”
“AWS and Advertising experienced accelerating Sales growth in 1Q,” said Thill, “Helping AMZN deliver its 4th consecutive quarter of upside to consensus Operating Income.”
AWS – as the “de facto” cloud infrastructure provider – will continue to benefit from the shift to remote working, while for advertising, Thill anticipates “higher post-pandemic share in consumer staples for AMZN driving increased penetration of $1T in combined CPG trade/advertising spend.”
Taking all these factors into consideration, Thill adds AMZN to Jefferies’ Franchise Picks List. The analyst rates the stock a Buy along with a $4,200 price target. The implication for investors? Upside of 20%. (To watch Thill’s track record, click here)
Amazon is one of a select club with a large yet unanimous analyst following. The stock has a Strong Buy consensus rating based on Buys only – 31, in total. The average price target is a touch higher than Thill’s, and at $4,297.58, indicates one-year gains of 23%. (See Amazon stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.