Amazon will surge 21% as deliveries stay elevated in a post-pandemic world, Canaccord says
- The boost to online retail seen through the pandemic could become a lasting boon for Amazon, Canaccord Genuity said Tuesday.
- Canaccord analysts lifted their price target to $4,100 in a note, implying a 21% leap from Tuesday's closing level.
- The team expects deliveries to remain elevated through reopenings and for AWS ad revenue to bounce back.
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The coronavirus drove a massive influx of consumer spending to Amazon. That boost could very well outlive the pandemic and help shares charge higher still, analysts at Canaccord Genuity said Tuesday.
The team led by Michael Graham lifted their price target for Amazon stock to $4,100 from $3,800, reflecting expectations for a 21% climb from Tuesday's closing level. The move comes after the e-commerce giant reported fourth-quarter figures that beat estimates for profit and revenue. Quarterly sales grew 44% and passed $100 billion for the first time ever.
The company also announced that founder Jeff Bezos will be replaced by AWS CEO Andy Jassy as Amazon's chief executive. Bezos will guide Amazon's long-term strategy as executive chairman.
The rosy earnings data suggests Amazon's popularity through the pandemic has a "good chance" of being permanently ingrained in consumer spending trends after stores reopen and the economy recovers, the analysts said in a note to clients. Comparables in the new year will be difficult to overcome, but a "new era" of leadership and "ongoing secular tailwinds" should bolster performance, they added.
Canaccord maintained a "buy" rating on Amazon. The company fluctuated in Wednesday trading and sits about 3% higher year-to-date.
Apart from a stronger retail business, Amazon's cloud computing arm is also expected to improve in 2021. AWS secured commitments from JPMorgan, Thomson Reuters, and Twitter in the fourth quarter, and ended the period with 28% revenue growth. The business's strong growth should pay dividends through the recovery as ad spending bounces back and its new deep-learning model improves ad targeting, Canaccord said.
To be sure, the company still faces its fair share of headwinds. Amazon guided for $2 billion in COVID-19 related expenses in the first quarter, down from twice as much in the previous three-month period. The company also guided for operating income of $3 billion to $6.5 billion in the first quarter, mostly falling below the consensus estimate of $6 billion.
Amazon traded at $3,358.73 per share as of 2:40 p.m. ET Wednesday. The company has 70 "buy" ratings from analysts with a median price target of $3,316.23.
