BofA Says Data Suggests Amazon Extended Lead In eCommerce, Cloud During 2015

Shares of Amazon surged higher by more than 100 percent since the start of 2015, drastically outperforming the broader Nasdaq index that gained only 5 percent. Despite the triple digit percentage return, Justin Post of Bank of America sees further upside for Amazon's stock heading into 2016. The analyst cited a proprietary consumer survey which suggests that the company extended its lead in 2015 in both eCommerce and the cloud. Post maintained a Buy rating on Amazon's stock with a price target boosted to $775 from a previous $740. Related Link:

Post's survey indicated "increasing Prime penetration" and "share of wallet" year over year and further indicates that Amazon is the "undisputed gateway" to eCommerce search in the US. The analyst estimated that Prime members spend roughly $1,370 annually versus $480 for non-Prime members. Post added that he expects Prime membership will reach 70 million users in 2016 which creates "eCommerce customer lock-in" for Amazon. Furthermore, the analyst's survey suggested that Amazon's US eCommerce market share was 33 percent and the company captured 66 percent of incremental US eCommerce spend in 2015. In fact, the company still has room to grow its share which could result in its sales increasing at a double digit rate for the foreseeable future.

Separately, Post argued that Amazon's Web Service (AWS) is the "best growth story" within the entire tech sector. The analyst estimated that AWS's revenue will rise to $12.3 billion in 2016 and $18.1 billion the following year from $7.9 billion in 2015. In addition to the strong revenue growth, Post is also expecting AWS' margins to improve to 25 percent in 2016 and 2017. Finally, despite the fact that AWS will only represent 9 percent of Amazon's total revenue in 2016, the analyst's estimates imply that the segment will contribute about 45 percent of the company's total operating profit. As such, AWS remains "central to the Amazon investment thesis."