Goldman sees 28% upside potential in Amazon and ties for Street-high price target on 'accelerating e-commerce growth'
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Matthew Fox
Jul 21, 2020, 01:16 IST
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"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.
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.
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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