Amazon's Move Into These 3 Massive Markets Not Yet Embedded Into Valuation

Following the recent selloff in Amazon.com, Inc. AMZN shares, which Benchmark’s Dan Kurnos believes was driven by “an irrational post-Trump retribution fear,” the stock has resumed its upward move, driven by the announcement of the launch of Amazon Go in 2017.

Kurnos maintained a Buy rating on the company, with a price target of $950.

Amazon Go

The analyst now sees “Amazon as having achieved scale or potentially entering 3 massive TAM verticals in Apparel/Fashion, Automotive and Grocery,” none of which appear to be factored into the current outlook for the company or the stock valuation.

Kurnos believes the Amazon Go announcement could be a potential gamechanger, if the technology is sound and fairly bug-free.

The analyst stated that if the company was able to establish 100 Amazon Go stores over the coming four years, it could drive incremental annual revenue of $1.5 billion, while only representing 0.2 percent of the total grocery market.

New Verticals

Even in the absence of the meaningful benefit from the new vertical launches, the analyst estimates Amazon could revenue by 28 percent in 2016 and 22 percent in 2017, with AWS growing 56 percent and 44 percent in 2016 and 2017, respectively.

Kurnos sees Apparel as a “major vertical of opportunity,” and believes that Amazon has achieve sufficient scale and manufacturer support to “begin notably moving the needle.”

However, the benefits from Automotive are expected to take longer, since the company would need to “crack the local code, which has historically eluded the larger players, although a Primecentric membership model could be appealing to dealerships.”