One analyst believes the company’s revenue is set to soar thanks to one-day Prime shipping…
Shares of Amazon are doing pretty well as is these days, but according to an RBC analyst, they could climb by as much as 50% in the coming year. That’s what analyst Mark Mahaney wrote to investors on Sunday evening.
Mahaney says that when Amazon launches its one-day Prime shipping across the U.S. and worldwide, it will “generate accelerating revenue and unit growth for some time.”
RBC raised its price target on Amazon from $2,250 per share to $2,600 per share. That represents a potential upside of about 46%. Mahaney also raised his 2020 revenue estimate for the company.
Amazon’s shares are currently up more than 18% year to date but down 11% from a year earlier. The company’s 52-week high is $2,050.50 … so $2,600 per share may seem like a stretch. But here are three reasons why it’s entirely possible.
Amazon Is Investing More in Its Fulfillment Network
During the second quarter of 2019, Amazon spent $800 million to take Prime shipping down from two days to one day. The company has built up a delivery fleet, rented planes, and is even offering its employees $10,000 to start their own local delivery businesses.
And most recently, Amazon bought into a cargo freight carrier called Cargojet. The company nows owns just under 10% of the Canadian carrier, enabling it to use Cargojet’s network even more.
Amazon was able to handle two-day shipping via truck deliveries, but that’s going to be a challenge with one-day shipping. Especially considering FedEx cut ties with the company. Amazon’s ongoing investments into its transportation network will enable it to continue to dominate the e-commerce market.
The Company Is Improving Its Third-Party Seller Program
A big part of Amazon’s success is its network of third-party sellers. This allows the company to offer nearly every product you can think of and often at a much lower price point than most of its competitors.
But Amazon’s third-party seller program has seen some backlash in recent months. The Wall Street Journal reported that many of the items sold by third-party vendors are incorrectly labeled or even unsafe to use.
Amazon is investing hundreds of thousands of dollars to find fake merchandise on its website. This year the company launched Project Zero, which uses machine learning and artificial intelligence to spot counterfeit items.
Amazon’s Prime Subscriptions Are Growing Quickly
Amazon’s efforts to cut down on shipping times seem to be paying off because its Prime subscriptions continue to grow. They aren’t growing quite as fast as they did in 2016 and 2017 — the market is becoming more saturated in the U.S. But the rates are still growing.
Amazon’s Prime membership topped 100 million members in the U.S. alone. These memberships helped the company grow its revenue by 37% from a year earlier. Amazon has shown it can incentivize its customers to return to and buy from the e-commerce giant again and again … So its revenue should continue to grow for years to come, as long as it can manage to maintain and grow Prime subscriptions.
