Amazon.com Inc.’s (AMZN) price target and rating have been reiterated by the investment and asset management firm, Piper Jaffray. Piper Jaffray analyst Gene Munster reiterated an overweight rating on the stock and maintained the price target at $400.00. Earlier this month, the firm had increased the price target to $400.00 from $350.00.
Munster’s optimism around the stock comes from Amazon's Prime subscription service and same-day delivery. Munster believes that the Prime service will see growth in subscribers, which will translate into increasing revenues. The same day delivery service on the other hand will give the company a competitive edge in the e-commerce market.
The optimism comes from the recent revelation by the company that about 10 million new members tried Amazon's Prime service for the first time, this holiday season, leading to yet another record holiday period for the e-commerce giant.
The Prime service charges customers a membership fee of $99 per annum and grants members the benefit of guaranteed two-day shipping. This could have been one of the reasons why the service attracted millions of first time members doing some last-minute shopping for their loved ones for Christmas.
In its annual post-Christmas debriefing session, Amazon also talked about its plan of expanding its one-hour delivery service and mobile-based shopping. This is the latest effort by the company to expand its operational activities (shopping) and increase delivery options.
Amazon.com, one of the largest online retailers in the world, is performing true to form, in our view. We believe that the company’s increasing content portfolio, expansion of its Prime service to different cities and delivery options will attract more customers, thereby expanding the company’s revenue base.
However, the e-tailer is under certain amount of pressure from investors who are increasingly unimpressed with its huge investments that continue to yield low returns because of its aggressive pricing strategies. Also, its dominant position is now threatened more than ever, with a number of companies jumping on the e-commerce bandwagon. It has been facing stiff competition from other online and mobile commerce giants such as Alibaba Group Holding (BABA), and eBay Inc. (EBAY).
Amazon currently has a Zacks Rank #5 (Strong Sell). A better-ranked stock in this industry is Mercadolibre, Inc (MELI) which carries a Zacks Rank #2 (Buy).
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