Analysis: Amazon's Potential Still Largely Untapped

Amazon.com, Inc. AMZN has had an incredible run in the past decade, gaining more than 1,300 percent. However, one Wall Street analyst says Amazon is nowhere close to peaking.

The Analyst

Piper Jaffray analyst Michael Olson reiterated an Outperform rating for Amazon and has raised his price target from $1,200 to $1,400.

The Thesis

Piper Jaffray’s latest survey of internet users reveals most people use Amazon far less than many investors would realize. Even after a record holiday season for Amazon, Piper found that half of survey respondents allocated between zero and 10 percent of their holiday shopping budget to Amazon. Roughly three out of four respondents allocated less than half of their holiday shopping budget to Amazon this year.

Olson says the survey results indicate Amazon users still have meaningful opportunity to increase their reliance on the platform in coming years.

“The conclusion is that Amazon, despite its size and continued strong growth, is arguably still in the early innings of its share gain potential, even in the company's most penetrated market,” Olson said in a Tuesday note.

Overall, Amazon accounted for just about 4 percent of total U.S. retail holiday spend, which eMarketer estimates was around $923 billion in total. Olson says this relatively low single-digit number is another opportunity for Amazon to expand its business.

In the near-term, Olson said investors can expect Amazon to continue to pump money into Whole Foods, lowering prices and increasing services in an attempt to further penetrate the grocery market as well.

Price Action

After another big year in 2017, Amazon is off to a hot start to 2018 as well. The stock is up another 7.2 percent so far in January.

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