BofA Raises Amazon Target On Sales Upside, Accelerating Unit Growth

Amazon.com, Inc’s AMZN sales growth is likely to accelerate in the second quarter, beating Street expectations of flat 26% growth, while the company’s higher fulfillment investment could be a driver in the back half of the year, according to BofA Securities.

The Analyst: Justin Post maintained a Buy rating for Amazon, while raising the price target from $2,600 to $3,000.

The Thesis: BofA’s aggregated credit and debit card data, positive checks from competing e-commerce platforms and the normalization of Amazon’s operations suggest sales upside in the second quarter, Post said in the note.

BofA’s aggregated credit and debit card data suggests acceleration in e-commerce growth to 83% in May, from 73% in April. Meanwhile, eBay Inc EBAY and Walmart Inc WMT have indicated accelerated growth in their U.S. e-commerce sales.

See Also: RBC Lifts Amazon Price Target To Street-High $3,300, Says It's 'Best Global Play' On E-Commerce

Amazon has made major fulfillment and personnel investment, and historically this has preceded accelerating unit growth, Post noted.

He further mentioned the company has added 175,000 new employees, opened hundreds of new delivery stations and fulfillment centers, and increased its grocery delivery capacity by 60%. These investments can help Amazon generate accelerating growth in the second quarter and achieve holiday season upside.

The analyst raised the revenue estimate for the second quarter by $6 billion to $85 billion, representing 34% growth. He also revised the GAAP earnings estimate for the full year to $18.96, above the consensus projection of $18.52.

AMZN Price Action: Shares of Amazon had appreciated 3.4% to $2,610.50 at the time of publication Tuesday.