4 Reasons Why Morgan Stanley Is Raising Amazon's Estimates

Amazon.com, Inc. AMZN is the main beneficiary of the continued inflection of U.S. consumers away from travel, restaurants and experiences into e-commerce, according to Morgan Stanley.

The Amazon Analyst: Brian Nowak maintained an Overweight rating on Amazon and raised the price target from $2,800 to $3,450.

The Amazon Thesis: Although Amazon’s stock has significantly outperformed year-to-date, there are four reasons to remain bullish, Nowak said in a Thursday note. (See his track record here.)

• Continued US E-Commerce Growth: With this trend continuing, the analyst said he expects the company’s market share to grow from 33.5% in 2019 to around 37% in 2021.
• International Markets: Around 30% of Amazon’s retail busines is contributed by markets outside the U.S., that have also been witnessing better ecommerce trends, he said. 
• Ad Business Inflection: The company’s sponsored product ad business has been robust in the current quarter, “as brands work to transition towards performance-based advertising faster and sellers attempt to capitalize on the surging AMZN demand,” Nowak said. 
• Growth In High-Margin Revenue: AWS, advertising and Prime are high-margin businesses and enable Amazon to continue “competing aggressively in retail, invest in new initiatives and deliver improving profitability,” the analyst said. 

Morgan Stanley raised its Amazon revenue estimates for 2020 and 2021 from $357.15 billion to $377.29 billion and from $426.35 billion to $450.07 billion, respectively.

AMZN Price Action: Amazon shares were down 2.81% at $2.924.43 at the time of publication Thursday. 

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Photo courtesy of Amazon.