Amazon Analyst On Positives, Negatives Of Coronavirus Spending: 'A Material Impact'

Amazon Analyst On Positives, Negatives Of Coronavirus Spending: 'A Material Impact'

Amazon.com, Inc. AMZN is poised to gain from the coronavirus pandemic, although its margins could remain under pressure, according to BofA Securities.

The Amazon Analyst

Justin Post maintained a Buy rating on Amazon with an unchanged $2,480 price target. 

The Amazon Thesis

“The coronavirus outbreak has driven some unusual demand patterns that will likely have a material impact on Amazon’s business,” Post said in a Sunday note. (See his track record here.)

The company’s e-commerce and cloud businesses could benefit from the “in-home” shift during the pandemic, the analyst said. 

BofA's checks indicate an acceleration in total e-commerce spending in March, with a major mix shift to grocery and consumer electronics at the cost of discretionary items, which are typically higher-margin goods, he said.

Post said he expects Amazon to generate 23% sales growth in the fiscal first quarter, although the analyst said margins could be under pressure due to higher fulfillment costs and the mix shift to lower-margin essentials.

The company may also face some disruptions, like the temporary stoppage of deliveries in India amid a countrywide lockdown, he said. Inventory disruptions that create cost inefficiencies are also possible, Post said.  

Growing cloud demand driven by increasing use of applications like Zoom, Fortnite and Netflix Inc NFLX will benefit AWS, although the impact is harder to estimate, according to BofA. 

Benzinga is covering every angle of how the coronavirus affects the financial world. For daily updates, sign up for our coronavirus newsletter.

Amazon Price Action

Amazon shares were up 4.13% at $371.88 at the time of publication Monday. 

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Photo courtesy of Amazon. 

Posted In: BofA SecuritiescoronavirusCovid-19Justin PostAnalyst ColorPrice TargetReiterationAnalyst Ratings