COWEN: Amazon has 5 levers it can pull to be the fastest growing stock of 2018
- Amazon has had a phenomenal 2017, but what is coming for the company next year?
- According to one analyst, the company has plenty of room to continue its growth.
- Watch Amazon's stock price change in real time here.
Amazon had an astounding 2017. It bought Whole Foods for $13.7 billion, set a record for sales during its Prime Day event, and saw its stock rise 53.55% to cross $1,000 for the first time ever. Oh, and its CEO, Jeff Bezos, became the only person in the world currently worth $100 billion.
Can Amazon duplicate its impressive year going into 2018?
"Despite AMZN's share appreciation (+164% since mid '15) and consistent positive media hype / buzz, there remain areas that are underappreciated or misunderstood," John Blackledge, an analyst at Cowen, said in a note to clients on Thursday.
That's a fairly impressive claim. Blackledge said there are five areas in particular that could drive material growth at Amazon in the coming year:
- Expanding the core retail business: This one is fairly obvious. Have more people spend more money on your platform and you have the chance to make more money. Some might think it would be hard for Amazon to grow, as some surveys predict its Prime service is currently in use by about half of America. But, Blackledge argues that there is still room to grow in the company's apparel, consumables, and food categories.
- Business to Business: Ever heard of Amazon taking over the dental supply industry? Well, it's slowly happening. Amazon's business to business platform allows for small businesses to order supplies from other businesses, and Amazon lends its logistics prowess to smooth out the process.
- International Opportunities: Amazon could be nearing its saturation point in the US, which means its time to broaden its horizons, according to Blackledge. India could be a good option, offering a $1.1 trillion retail opportunity, and Mexico and Australia could offer even more growth if Amazon decides to focus on growing its offerings in those areas next year.
- Amazon Web Services: Running a cloud service has proved to be one of Amazon's best business ideas yet. The business has led to impressive revenue growth with great margins, and it has even more room to improve in the coming year, Blackledge predicted. Secular tailwinds could help drive AWS to a compound annual growth rate of 26% through 2023.
- Advertising: Amazon has a chance to grow its advertising business to a real powerhouse in 2018. The company could leverage its vast user information databases to offer effective ad targeting while keeping margins high.
Amazon faces a few risks in 2018 too. Blackledge says the company could lose part of its market share in online retail or face more roadblocks than expected while expanding overseas. But, when looking at the whole picture, Blackledge rates the company an outperform and says that Amazon is one of his top picks companies for 2018.
