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Amazon Prime 'Will Travel Well,' Bernstein Says

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In a report published Thursday, Bernstein analyst Carlos Kirjner maintained an Outperform rating on Amazon.com, Inc. (NASDAQ: AMZN), with a price target of $600.

"We believe Amazon's International EGM (Electronics and General Merchandise) revenues are about to accelerate, increasing the chances that Amazon will outperform. Amazon's EGM business has grown significantly more slowly than North America EGM," analyst Carlos Kirjner wrote.

The difference could have been largely on account of the "relatively lower penetration of Prime among Amazon users and lower number of Prime-eligible SKUs outside of the US." This is reflected by Bernstein's proprietary consumer research as well as Amazon's disclosures.

"This raises the question of whether it is just a matter of time until the penetration for Prime internationally reaches domestic levels, or whether the Prime value proposition is fundamentally less attractive outside the US, e.g., due to different competitive offers," Kirjner said.

If Prime is able to increase penetration in major international markets and catch up with penetration in North America, there could be "significant reacceleration of International EGM."

However, if the Prime value proposition is not fundamentally as attractive, there could be "continued slower growth of International EGM versus North America's." Many investors believe that Prime's offer of guaranteed fast shipping can be "easily matched by Amazon's competitors internationally," the report added.

A study of the shipping terms offered by a number of Amazon's online competitors indicates that, "in nearly all cases, standard delivery options for most major competitors take longer than Prime's offer and often require a payment," Kirjner commented.

In the report Bernstein noted, "These findings increase our conviction that the Prime proposition is unique and attractive also outside the US. As a consequence, we believe Prime penetration will continue to increase internationally and expect to see International EGM to sustain and possibly increase its current growth rate in the near future, possibly contributing to a better-than-expected trajectory for Amazon."

Latest Ratings for AMZN

DateFirmActionFromTo
Nov 2016CitigroupMaintainsBuy
Nov 2016CitigroupMaintainsBuy
Nov 2016Axiom CapitalMaintainsBuy

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