Cantor Highlights A Big Opportunity For Amazon

Against the backdrop of accelerating brick-and-mortar store closings, the rise in Amazon.com, Inc’s AMZN private label offerings, the platform’s massive scale and its “superior value proposition” position the company to “dominate the new Retail,” Cantor Fitzgerald’s Youssef Squali said in a report.

Squali reiterated an Overweight rating on the company, while raising the price target from $965 to $970.

Big Opportunity For Amazon

Faced with major structural headwinds, about 390 physical stores have closed across the U.S. since mid-2016, due to bankruptcies, management changes and strategic reviews.

The trend continues.

The annual revenue opportunity from these store closings is estimated at $2.5 billion by Fung Global Retail. Squali expects Amazon to be able to capture 20-40 percent of this annual revenue opportunity.

Related Link: Yet Another Sign Of Amazon's Dominance Over Retail

Meanwhile, e-commerce is growing at a pace of 15-20 percent year-over-year and Amazon is the “biggest beneficiary,” with a market share of 35 percent, the analyst pointed out.

“A successful private label strategy should drive revenue growth and strengthen Amazon's value proposition to consumers and benefit margins over time,” Squali said. He raised revenue estimates for 2017 and 2018 by around $500 million and  $1 billion, respectively, to reflect additional revenue flowing out of the closed stores.

For some context, e-commerce sales in the fourth quarter of 2016 accounted for 8.3 percent of total retail sales.

The EPS estimates for 2017 and 2018 have been raised from $8.49 to $8.51 and from $14.39 to $14.40, respectively.