Prime Day Is Prime Time to Buy Amazon Stock, Analysts Say - Barron's

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Analysts say Prime Day may help spread out holiday demand, reducing strain on the company’s delivery systems.

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With Amazon Prime Day coming up next week on Oct. 13 and 14, Wall Street analysts are expecting an early holiday gift for investors in the e-commerce giant.

J.P. Morgan analyst Doug Anmuth said in a research note that he expects the Amazon.com (ticker: AMZN) event to generate $7.5 billion in revenue this year, up about 42% from an estimated $5.3 billion in 2019. That would be a huge result, given that Anmuth noted that sales last year topped the prior year’s Black Friday and Cyber Monday sales combined.

The analyst pointed out that Prime Day this year is running about three months later than its usual mid-July timing, so Amazon is promoting the event as an early start to the holiday season, rather than going with the typical focus on summer and back-to-school. He thinks Amazon will benefit from an earlier start to the holiday shopping season, and that Prime Day will smooth out demand across the fourth quarter.

“We expect the shift online to further accelerate this holiday season and Amazon enters its busiest quarter already seeing heavy demand and delivery times not yet normalized to pre-Covid-19 levels,” he wrote.

“But we believe Amazon is well positioned to handle the holiday surge, with the company increasing warehouse square footage 50% - including opening 100 new operations buildings in September - and Amazon Logistics set to deliver more than 50% of all packages from Amazon fulfillment centers, thereby reducing dependence on third-party shippers.”

Anmuth repeated his Overweight rating and $4,050 price target on Amazon. The stock remains his “top idea.”

Benchmark analyst Daniel Kursos also repeated a Buy rating on Amazon shares, lifting his price target to $3,800 from $3,675. Kursos noted that the stock is down more than 10% from its recent peak despite “unabated, unprecedented e-commerce demand,” and flagged various near-term headwinds for Amazon, “including capacity, hiring, shipping and now, potentially, stimulus/economic issues.”

But he added that even with Target (TGT) running its Target Days sale simultaneously with Prime Day, he expects Amazon to be “a material [market] share gainer this holiday period, while also spreading out/front running some early holiday demand to avoid shipping shortages and incrementally costly last mile delivery methods.”

His view is that the recent pullback has provided “an excellent entry point into ...a multi-year story.”

Amazon shares were up 2.8% to $3,187.19 in Wednesday trading. The S&P 500 and Dow Jones Industrial Average were up roughly 2%.

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