Goldman sees 28% upside potential in Amazon and ties for Street-high price target on 'accelerating e-commerce growth'

• "Accelerating e-commerce growth" will propel Amazon to all-time highs, according to Goldman Sachs.
• Goldman and Jefferies both assigned a Street-high price target of $3,800 on Monday, representing upside potential of 28% from Amazon's close on Friday.
• People have relied heavily on online shopping during the COVID-19 pandemic.
• Amazon surged as much as 6% on Monday following the price-target increases.
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Amazon has already gained $561 billion in market value this year — and if Goldman Sachs and Jefferies are right, expect that number to continue to grow.

On Monday, both firms raised their Amazon price target to a Wall Street-high $3,800, representing potential upside of 28% from Friday's close. Goldman previously had a $3,000 price target.

According to Goldman, Amazon is poised to benefit from "accelerating e-commerce growth" during the COVID-19 pandemic. Data from Mastercard indicates that e-commerce grew by 93% year-over-year in May, and weekly data from Facteus suggests consumer spending on Amazon's platform has been up more than 60% year-over-year since the end of April.

Considering this data, Goldman increased its North American revenue estimate to an increase of 48% year-over-year for the second quarter, versus its prior estimate of 33% growth. Goldman said it expected the strength in Amazon's e-commerce unit to continue into the third quarter.

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Goldman added that its updated revenue-growth estimates "may prove too low," suggesting that there could be even more upside from its Monday price-target boost.

While Goldman increased its revenue-growth estimate for Amazon over the next few years, it kept EBITDA estimates unchanged to account for increased spending related to COVID-19 and infrastructure for Amazon Web Services and its retail operations "to accommodate faster growth," it said.

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Goldman derived its $3,800 price target for Amazon from a sum-of-the-parts valuation that implies a 2021 enterprise value/EBITDA multiple of 30x.

Key downside risks to Goldman's bullish stance on Amazon include competition, margin pressures from investment, and valuation, the note said.

Shares of Amazon surged as much as 6%, to $3,142.21, on Monday.

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