The Stock of Amazon Could Rocket Another 30%, According to This New Bull

A Stifel analyst, Mark Kelley, has entered the bullish camp on Amazon.com Inc.'s stock, suggesting it could surge by approximately 30%. Kelley initiated coverage of Amazon shares with a buy rating and set a price target of $173. He highlights Amazon's vast scale in the retail sector and its success in leveraging that scale to expand into related businesses, such as advertising.

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Kelley is optimistic about Amazon's potential to exceed Wall Street expectations. He anticipates that Amazon will outperform operating-margin projections, driven by improvements in its fulfillment operations. Amazon recently transitioned from a national to a regionalized fulfillment network, which has streamlined the network and improved the predictability of same- and next-day deliveries, with a broader range of products available for expedited shipping.

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Moreover, Amazon's management has indicated other enhancements that lead Kelley to believe the e-commerce giant can surpass its pre-pandemic margin profile. Kelley also discusses the growth potential in Amazon's advertising business, noting its expansion into retail media and plans to introduce ads on Prime Video. Amazon offers a range of ad tech tools and has become a Pinterest advertising partner.

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Despite Amazon's 58% gain in share price this year, Kelley considers its valuation attractive. The stock is trading at roughly 11 times the consensus estimates for adjusted earnings before interest, taxes, depreciation, and amortization over the next two years. This valuation profile, according to Kelley, is appealing given Amazon's anticipated growth trajectory and margin expansion through 2025.

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Additionally, Kelley initiated coverage on eBay Inc., Etsy Inc., and Wayfair Inc., assigning hold ratings to these three companies. While he acknowledges eBay's efforts in its tech-enabled strategy, he suggests that it may take more time to see the benefits of the ongoing turnaround. For Etsy, he appreciates its unique platform but expresses concerns about recent buyer trends and discretionary spending patterns. Regarding Wayfair, he commends the company's work in expanding the online home-furnishings market but notes pressure on average order values as customers allocate more of their spending towards services.

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