Amazon's US GMV Growth Could Surpass Estimates: Credit Suisse Analyst

Credit Suisse analyst Stephen Ju reiterates an Outperform rating on Amazon.Com, Inc AMZN with a price target of 142.00.

The analyst compared Amazon’s U.S. e-commerce GMV growth to the data set released by the Census Department to conclude that it is accelerating share gains.

After progressing through 2020 and 2021 with minimal share gains or losses, his analysis suggests Amazon started to step up in 3Q22 – Prime Day meaningfully returned to its usual slot in 3Q – so skeptics can point to easier comparisons as a basis for the share gain. 

However, as he moved to 4Q22 and 1Q23, this represents the second quarter of accelerating share gains amidst normalizing comparisons. 

The analyst believes the underlying reason remains the higher service level (one-day and same-day Prime delivery), as Amazon no longer operates with capacity constraints.

In his view, this points toward a potential upside to U.S. GMV estimates for the balance of 2023 – by his calculations, Amazon added YOY ~$11 billion of GMV in 1Q23 vs. ~$4 billion in 1Q22, ~$13 billion in 4Q22, and ~$43 billion in 2022. 

So he appears to be on the path to do at least the exact nominal dollar amounts of GMV growth vs. his currently published $35 billion. And the potential for faster GMV growth gets him to revisit the analysis he previously published – even as he estimates an aggressive growth scenario, early 2024 is likely the year in which Amazon may return to investing more heavily. 

The analyst writes that shareholders should be willing to underwrite growth CapEx. 

The re-rating reflects continued e-commerce segment operating margin expansion as Amazon grows into its more extensive infrastructure, optionality for faster-than-expected FCF growth vis-à-vis its advertising segment, the potential for more excellent AWS growth durability as suggested by the ongoing capital intensity in the business, and the rising performance obligations.

Price Action: AMZN shares traded lower by 0.82% at $126.08 on the last check Friday.

Photo via Wikimedia Commons