It’s the holiday season. Or maybe the better way to describe it is it’s Amazon (NASDAQ:AMZN) season. I know that many of you may be thinking when is it not Amazon season? However, at this time of year, the e-commerce giant turns it up a notch. And that’s a good reason to consider loading up on Amazon stock before the end of the year.
AMZN stock is down a little over 3.5% in the last six months. Amazon stock price as of this writing sits just under $1,774. That’s down from its 52-week high of $2,035.80. The stock has been ticking up in the last month, but it still is trading at a relative discount.
It almost goes without saying that analysts love Amazon. Of the 42 analysts who have issued ratings, 41 give the stock a buy rating. The average 12-month price target is $2,209.16. That’s a 24.6% increase from its current level. Even the lowest price target of $1,965 represents a gain of over 10% from the stock’s current level.
And a large catalyst for the increase in Amazon stock price is going to be due to the revenue the e-commerce giant brings in through its holiday sales.
Consumers are Making the Internet Their Holiday Sales Destination
Not that many people question this, but if you needed to be convinced that more and more U.S. holiday sales were happening online, here are some e-commerce figures to consider.
- In 2016, the total of all U.S. holiday season digital retail e-commerce sales was $80.22 billion.
- In 2017, the total of all U.S. holiday season desktop retail e-commerce sales alone was $72.3 billion.
- In 2019, the forecast for U.S. holiday season mobile retail e-commerce sales is $64.29 billion.
These numbers tell me two things. First, e-commerce sales during the holiday season continue to grow. And second, that the use of mobile devices for shopping is gaining a larger percentage of those sales.
According to a ReadyCloud.com blog, in 2018, 40% of Black Friday’s multi-billion dollars of sales came from mobile devices. Shopify (NYSE:SHOP) took that data one step further saying that in 2018, mobile sales made up 66% of the e-commerce haul from Black Friday through Cyber Monday.
Amazon Owns the Mobile Space
Savvy online retailers know that 55% of their traffic (and sales) come from smartphones. An eMarketer study shows that by the end of 2019, people will spend more time in front of their smartphones than they do watching television.
In 2016, Business Insider reported that mobile shoppers returned to Amazon 150% more than they did to Walmart (NYSE:WMT) and 350% more than they did to Target (NYSE:TGT). And 70% of Amazon’s holiday shoppers made purchases from a mobile device. In fact, 61% of mobile-only shoppers were exclusive to Amazon.
Some of this can be explained by the simple fact that there was no other option. In 2017, only 40% of all retailers even offered a mobile website. Amazon, of course, was one of those retailers. Not only did the company have a presence, they also had one-click checkout that set the stage for a surge in handset spending.
In 2018, Amazon accounted for $258 billion or 50% of all e-commerce sales. On a year-over-year basis, Amazon grew their sales by 29.2%. But in terms of percentage of e-commerce sales last year, the next closest competitor to Amazon was eBay (NASDAQ:EBAY) with 6.6%.
Amazon Is a Good Value Right Now
Amazon stock is currently trading at 24.8-times cash flow from operations (CFO) per share. This is lower than both its five-year (27) and ten-year (27.9) medians for this same number. And it’s fair to say that Amazon is transforming itself from being “just” an e-commerce company into something much bigger, particularly with their move into cloud computing.
But like Alibaba (NYSE:BABA), Amazon will be first and foremost an e-commerce company. And as they get more efficient in the way they manage same- and next-day delivery, there’s no reason to believe they won’t continue to own not just this holiday season, but the next several holiday seasons as well.
As of this writing, Chris Markoch did not hold a position in any of the aforementioned securities.
